1099 Forms

1099 income can take a number of forms, but you are required to report all those sources of income to the Internal Revenue Service. If you receive interest from your bank or credit union, you can expect a 1099-INT form in the mail. You should receive a 1099-DIV form if you receive dividend income, or a 1099-MISC form if you receive compensation as an independent contractor or self-employed individual. Depending on the amount of 1099 income you could owe additional taxes to the IRS.

Additional Income

Many people find that they have additional income over and above any wages they receive from their employers. If you do receive 1099 forms, you need to include the amounts shown on those 1099 forms when you do your income taxes. The IRS receives a copy of every 1099 form you get, and if you underreport your income you can expect a letter from the tax agency requesting more taxes, and perhaps levying penalties and interest as well.

Tax Planning

If you derive part of your income from sources reported on a 1099 form, do advance tax planning to determine how that extra income will impact your taxes. If you normally get a large tax refund, you might still get a refund even if you have a fair amount of 1099 income. If your refund is typically a small one, that 1099 income might be enough to throw you into a situation where you owe additional taxes to the IRS.

Adjust Withholding

If your advance tax planning reveals that you might owe additional money to the government instead of receiving your usual refund, preserve your tax refund by filling out and filing a new W-4 with your employer. You can request a new W-4 from your company's human resources department whenever you want, and you can use that form to request that additional taxes be withheld from your paycheck. Adjusting your tax withholding with a new W-4 can help you balance out what you owe and ensure that you get a tax refund, even with the additional 1099 income.