There are a number of situations where you’ll have to create and/or file Form 1099s. Are you affected?

If you’ve been sending Form 1099s for years, you’re probably already working on them or have completed them. If you receive them regularly, they should be on their way to you soon (if they haven’t already arrived), waiting to be used in the preparation of your income taxes.

But if you’ve never sent one, it’s worth a look at your financials to see if you should. There are countless scenarios that would make that necessary.  [MORE] . . . 

• Net investment income.  This amount generally includes income such as:

o Interest,

o Dividends,

o Capital gains,

o Rental and royalty income, and

o Non-qualified annuities.

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. It also does not include any gain from the sale of your main home that you exclude from your income.

Refer to Form 8960, Net Investment Income Tax, to see if this tax applies to you. You can check the form’s instructions for the details on how to figure the tax.

• How to report.  If you owe the tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enough estimated taxes, you may have to pay an estimated tax penalty.

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax.  You may owe this tax if you have income from investments and your income for the year is more than certain limits.  Here are four things from the IRS that you should know about this tax:

1.  Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2.  Net investment income.  This amount generally includes income such as:

• interest
• dividends
• capital gains
• rental and royalty income
• non-qualified annuities

This list is not all-inclusive.  Net investment income normally does not include wages and most self-employment income.  It does not include unemployment compensation, Social Security benefits or alimony.  Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocable to this income. The result is your net investment income.  Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3.  Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

 Filing Status                            Threshold Amount
 Single or Head of household            $200,000
 Married filing jointly                          $250,000
 Married filing separately                   $125,000
 Qualifying widow(er) with a child     $250,000

4.  How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enough estimated taxes, you may have to pay an estimated tax penalty