Top Frequently Asked Questions for Interest, Dividends, Other Types of Income

How do I report this Form 1099-DIV I received from my mutual fund?

Answer:

I received a Form 1099-MISC instead of a Form W-2. I'm not self-employed and don't have a business. How do I report this income?

Answer:

If payment for services you provided is listed in box 7 of Form 1099-MISC, Miscellaneous Income, the payer is treating you as a self-employed worker, also referred to as an independent contractor.

  • You don't necessarily have to have a business for payments for your services to be reported on Form 1099-MISC. You may simply perform services as a non-employee.
  • The payer has determined that an employer-employee relationship doesn't exist in your case.

If you weren't an employee of the payer, where you report the income depends on whether your activity is a trade or business. You're in a self-employed trade or business if your primary purpose is to make a profit and your activity is regular and continuous.

If you believe you may be an employee of the payer, see Publication 1779, Independent Contractor or Employee for an explanation of the difference between an independent contractor and an employee. For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, (Circular E), Employer's Tax Guide, Chapter 2 of Publication 15-A, Employer's Supplemental Tax Guide, Independent Contractor (Self-Employed) or Employee? and Tax Topic 762, Independent Contractor vs. Employee.

My son is a newspaper carrier. I would like to know if his income is subject to social security and Medicare taxes, and if he must file a Schedule C.

Answer:

As a newspaper carrier, your son may be a direct seller liable to pay self-employment tax. A direct seller is someone who satisfies the following conditions:

  • The person is engaged in the trade or business of delivering or distributing newspapers or shopping news, including directly-related services such as soliciting customers and collecting receipts;
  • Substantially all of the pay for these services (whether or not paid in cash) directly relates to sales or other output rather than to the number of hours worked; and
  • The person performs these services under a written contract that states that the person won't be treated as an employee for federal tax purposes.

Self-employed persons, including direct sellers, report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) or Schedule C-EZ (Form 1040), Net Profit from Business (Sole Proprietorship). Use Schedule SE (Form 1040), Self-Employment Tax if the net earnings from self-employment are $400 or more.

If your son isn't a direct seller (i.e., he doesn't satisfy the conditions above), he may still be liable to pay self-employment tax if he's engaged in a trade or business.

If your son isn't a direct seller and isn't engaged in a trade or business, he may be an employee whose wages are subject to income tax withholding, and social security and Medicare taxes.

If your son is your employee and is under 18 years of age, his income generally isn't subject to social security and Medicare taxes. If his income exceeds a threshold amount, he must report it as wages on Form 1040, U.S. Individual Income Tax Return.

For more information on the rules that apply to direct sellers and newspaper carriers and distributors, see Publication 334, Tax Guide for Small Business. For an explanation of the difference between an independent contractor and an employee, see Publication 1779, Independent Contractor or Employee and Tax Topic 762, Independent Contractor vs. Employee.

I received a Form 1099-MISC with an amount in box 7 for nonemployee compensation. What forms and schedules should I use to report income earned as an independent contractor?

Answer:

Must I file quarterly forms to report income as an independent contractor?

Answer:

You may need to make quarterly estimated tax payments. For information on estimated tax payments, refer to Form 1040-ES, Estimated Tax for Individuals.

Note: You may also have state and local requirements for estimated tax payments. See your state's individual website for additional information. To access information for your state, refer to our State Government Websites page.

Are alimony payments or child support payments considered taxable income?

Answer:

Child support payments are neither deductible by the payer nor taxable to the recipient. When you calculate your gross income to see if you're required to file a tax return, don't include child support payments received.

Under divorce or separation instruments executed on or before December 31, 2018, alimony payments are deductible by the payer and taxable to the recipient. When you calculate your gross income to see if you’re required to file a tax return, you should include alimony payments received under such an instrument.

However, under divorce or separation instruments executed after December 31, 2018, and under certain instruments executed on or before December 31, 2018 but modified after such date, alimony payments are neither deductible by the payer nor taxable to the recipient. When you calculate your gross income to see if you’re required to file a tax return, don’t include alimony payments received under such an instrument.

Should I include the amount in box 10, Dependent Care Benefits, of my Form W-2 when calculating my income?

Answer:

Box 10 of your W-2 shows the total amount of dependent care benefits that your employer paid to you or incurred on your behalf. Amounts over $5,000 ($2,500 in the case of a separate return filed by a married individual) are also included in box 1.

You must complete Part III of Form 2441, Child and Dependent Care Expenses to figure the amount, if any, that you can exclude from your income.

Is the long-term disability I am receiving considered taxable?

Answer:

You must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer:

  • If both you and your employer have paid the premiums for the plan, only the amount you receive for your disability that's due to your employer's payments is reported as income.
  • If you pay the entire cost of a health or accident insurance plan, don't include any amounts you receive for your disability as income on your tax return.
  • If you pay the premiums of a health or accident insurance plan through a cafeteria plan, and you didn't include the amount of the premium as taxable income to you, the premiums are considered paid by your employer, and the disability benefits are fully taxable.
  • If the amounts are taxable, you can submit a Form W-4S, Request for Federal Income Tax Withholding From Sick Pay to the insurance company, or make estimated tax payments by filing Form 1040-ES, Estimated Tax for Individuals.

Amounts you receive from your employer while you're sick or injured are part of your salary or wages.

  • Report the amount you receive on the line "Wages, salaries, tips, etc." on Form 1040, U.S. Individual Income Tax Return.
  • You must include in your income sick pay from any of the following:
    • A welfare fund
    • A state sickness or disability fund
    • An association of employers or employees
    • An insurance company, if your employer paid for the plan

You can generally exclude from income payments you receive from qualified long-term care insurance contracts as reimbursement of medical expenses received for personal injury or sickness under an accident and health insurance contract. Also, you can exclude from income certain payments received under a life insurance contract on the life of a terminally or chronically ill individual (accelerated death benefits). Refer to Publication 907, Tax Highlights for Persons with Disabilities.

You may be able to deduct your out-of-pocket expenses for medical care above any reimbursements, if you're eligible to itemize your deductions. You'll need to review Publication 502, Medical and Dental Expenses.

For more information, refer to Publication 907.

I received a Segal AmeriCorps Education Award and an income statement for it. Are these payments taxable?

Answer:

Yes, Segal AmeriCorps Education Awards are taxable in the year they're paid. If you receive an award and the payment was $600 or more during the year, you should receive a Form 1099-MISC, Miscellaneous Income. The 1099-MISC will show the amount of the award in box 3, Other Income. There is no withholding on this payment unless you failed to provide your taxpayer identification number. Report the payment amount on the "Other income" line of Schedule 1 (Form 1040) and attach to Form 1040, U.S. Individual Income Tax Return, even if you don't receive Form 1099-MISC.

How do I report interest income on an installment sale?

Answer:

If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for adequate stated interest payable with the deferred payments. That interest generally is taxable as ordinary income in the same manner as any other interest income. However, if the interest is not unconditionally payable at least annually, then the amount of interest to be reported for a taxable year may be subject to the provisions of the Code dealing with original issue discount.

If an installment contract doesn't provide for adequate stated interest, the amount of interest to be reported for a taxable year will be determined under the provisions of the Code dealing with imputed interest or original issue discount. Report interest income from an installment sale payment on Form 1040, U.S. Individual Income Tax Return.

If your taxable interest income is more than $1,500, be sure to include that income on Schedule B (Form 1040), Interest and Ordinary Dividends and attach it to your return.

You may receive a letter or similar document instead of a Form 1099-INT, Interest Income or Form 1099-OID, Original Issue Discount reporting your interest income. You still need to report it in full on your tax return.

For additional information on interest income, refer to Tax Topic 403. For additional information on installment sales, refer to Tax Topic 705 or Publication 537, Installment Sales.

Frequently Asked Question Subcategories for Interest, Dividends, Other Types of Income