Receiving a Form 1099 can be unpleasant because, unlike a Form W-2, it likely reports income that hasn’t been already been taxed in the form of withholding. So unless you’ve managed to set aside the appropriate portion of your income throughout the year, it’s easy to see the 1099 as representing a big liability.
Then again, “If you’re getting one, you made money,” said certified financial planner Sean Kelleher, co-founder and principal of Riverchase Financial Planning in Lewisville, Texas.
However, the 1099 can complicate your tax return, he said. Part of the complication is the task of keeping track of the various types of taxable income – there are 17 different versions of Form 1099 – and Kelleher said it’s common for people to receive five to 10 various 1099s in any year.
“The 1099 comes in many flavors, and the flavors are usually in the letters that come after the numbers,” said Jon Beyrer, a certified financial planner who is vice president of wealth management for Solana Beach, California-based Blankenship & Foster LLC. “There’s pretty much the whole alphabet.”
"Any expense you incur in the ordinary and necessary conduct of your business is going to be deductible."
- Keith Hall, tax adviser, National Association of the Self-Employed