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Did you receive one or multiple 1099-MISC forms in the mail? While you may or may not know what they are, you may not know how many uses these forms have. To help you out, we thought we’d take a quick look at it.

For a quick overview, the 1099-MISC is the form freelancers and other independent contractors get instead of a W-2. It works a little differently because freelancers don’t get regular taxes taken out of their paychecks like full and part time employees do; they have to comply with tax laws completely on their own.

So when you get the form(s), you’ll notice that it only includes information pertaining to how much money you made through each client. You won’t see much other info, especially tax information.

1. Federal Taxes

The first thing you’ll do with your 1099-MISC is, of course, file your federal taxes. This is primarily what these forms are for and why you – and the IRS – get a copy of them around tax time.

Before you actually file, you should check the amount found on form 1099-MISC against your own bookkeeping records. Just because the numbers are on an official form doesn’t mean your client or their accountant couldn’t have made an error. All it takes is one mix-up to create a problem for both parties. For example, if your client accidentally counted one job twice, the IRS is going to come to you looking for you to pay taxes on money you never really earned!

From there, you’ll need to make sure that you enter ALL income you made through self-employment over the year on your Schedule C tax form.  Taxes are due on this. But don’t forget that you can also add your business expenses on Schedule C, too, to lower your tax burden.

2. State Taxes

If you live in a state with income tax (which is most of them), then you’ll need the amounts found on your 1099-MISC forms for that, too. All states have slightly different income tax filing requirements, but the due date is also April 15th.

3. File Away for Later

The last thing you should do with your 1099-MISC tax forms is to file them away. While your natural inclination is to toss them in the recycling bin (or the closest bonfire), you should keep them around, preferably neatly tucked away in their own folder, or better yet, stored digitally.

Why? Because the last thing you want to happen is the IRS to notify you that your business is getting audited and you aren’t prepared. Yes, even though the IRS should also have a copy of your 1099-MISC, it’s best to keep all your tax forms around for a few years.

How many 1099-MISC forms did you receive from clients this year?