What’s the most important tax form? You might say Form 1040, and you would be right that everyone has to file one. But arguably a close second is IRS Forms 1099, which usually arrive in late January. The IRS likes these reports (a lot) because they allow easy computer matching of Form 1099 data against tax returns. Yup, don’t report one and you can expect a tax notice. As all the forms descend this time of year, there are key things to know.

Generally, businesses must issue the forms to any payee (other than a corporation) who receives $600 or more during the year. That's just the basic threshold rule, but there are many exceptions with lower or different rules. That's why you probably get a Form 1099 for every bank account you have, even if you earned only $10 of interest income. The key to Forms 1099 is IRS's matching. Every Form 1099 includes the payer's employer identification number and the payee's Social Security number. The IRS matches Forms 1099 with the payee's tax return.

If you think the Form 1099 is wrong but you can’t convince the payer you're right, you’ll have to report it and explain it on your tax return. If you receive a Form 1099, you can't just ignore it, because the IRS won't. There's a 1099-INT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds and unemployment benefits; 1099-R for pensions and payouts from your individual retirement accounts; 1099-B for broker transactions and barter exchanges; 1099-S for real estate transactions, etc. There are many categories, but the Form 1099-MISC (for miscellaneous) seems to prompt the most questions and covers the biggest territory.

Don’t assume you're off the hook for reporting income if you don't receive a Form 1099. Even if you never receive a Form 1099, if you receive income, you must report it, and you don't need a 1099 to report income. Besides, with people moving addresses and lost mail, many Forms 1099 go missing. But if the form is issued, the information will be reported to the IRS based on your Social Security number regardless of whether you receive the paper form.

Update your address directly with payers, as well as putting a forwarding order in with the U.S. Post Office. You'll want to see any forms the IRS sees. Any Form 1099 sent to you also goes to the IRS. The deadline is Jan. 31 for mailing Forms 1099 to taxpayers, but the payer generally has until the end of February to send all its Forms 1099 to the IRS. If there is an error on a Form 1099 tell the payer immediately. If the payer has already dispatched the incorrect form to the IRS, ask the payer to send in a corrected form. If you forget to report a Form 1099, the IRS will send you a computer-generated letter billing you for the taxes. If it's correct, just pay it.

Keeping payers advised of your current address is a good idea, as is reporting errors to payers. However, if you don't receive a Form 1099 you expect, consider not asking for it. If you are expecting a Form 1099, you know about the income, so just report that amount on your tax return. IRS computers have no problem with that. If you call or write the payer and raise the issue, you may end up with two of them, one issued in the ordinary course (even if it never got to you), and one issued because you called. For that reason, if you know about the income but are missing an IRS Form 1099, you may want to keep quiet.

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