Taxes – Your Information Reporting Requirements

You may wonder how the IRS tracks the movement of money so that it knows who owes how much. Well, there are a number of ways and information returns are one of the key ones.

What are information reporting returns? They are tax forms the IRS requires you to file. The good news is you do not have to make a payment with the filing. The bad news is, there are a lot of them and they have to be filed at different times throughout the year.

So, who has to file these information reporting returns with the IRS. Well, just about everybody regardless of the form they take. The relatively good news is the burden for you and me is relatively small and we might not have to file anything at all. Businesses, on the other hand, have a monstrous load to deal with. From W-2 forms to 1099 filings, they can spend the better part of the year having at them.

You may have filed information returns or at least received copies of them and not even realize what they were. If you did some non-salary work for a business, you might have received a 1099-MISC. A capital gains distribution that was made to you, such as cash from a stock sale, is reported on a 1099-DIV.

The information reporting return requirements are one of the areas where the tax code is arguably at its worst. There are literally hundreds of these forms that may or may not be required to be filed in certain situations. So, how do you keep track of them all? There really isn't a way unless you want to become an expert on the tax code. The IRS will often proactively send them to you, but you are not excused from your reporting duty if they don't.

To give you an example of how messed up this area of tax law is, one needs to just look at the filing procedure for your information returns. You just send them in, right? Ah, no. The IRS is apparently also confused. For many of the most common information returns, you also have to file a form 1096. What does it do? It tells the IRS how many information forms you are going to file!

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on income taxes, credits, deductions and more.