- [Instructor] Let's talk about a few very common IRS forms
or statements that you are likely to encounter in your life.
The first one of these you see right over here
is called a 1098,
and there are different types of 1098 forms.
There's a 1098, which is to report mortgage interest
that you have paid in the past year.
There's a 1098-T, which is for tuition payments or,
or scholarships for students, 1098-E,
which is about student loan interest that you might pay
and might be deductible.
The whole point here is it's about things that you have paid
that might be deductible for tax purposes.
So for example, this is a situation where the person,
it looks like they have paid $10,000 in
mortgage interest that year.
So assuming it is deductible for them,
if they made from their job, let's say
they made $50,000 in wages from their job, given this,
assuming it's tax deductible,
what is going to be their actual taxable income?
Well, the way a deduction works is you subtract it out from
your income to come up with a new number of
what is going to be taxed.
So your tax isn't gonna go down by $10,000.
Your to your taxable income is going to go down by $10,000,
which will reduce your taxes by something less than $10,000.
It's probably someplace around 10 to to 30
or 40% of that $10,000, but it's gonna be something less,
but it will reduce your taxes.
Similarly, a 1098-E if you paid student loan interest
and if it's tax deductible, a similar thing might happen.
Now, another form, which sounds almost the same
but is almost, you could really think of it as the reverse
of a 1098 is a 1099.
A 1099 instead of reporting,
say interest that you have paid that is tax deductible,
a 1099 reports interest
or income that you have earned from some sources
that you now have to add to your taxable income
to make sure you're paying taxes on it.
So right over here, this is a 1099-MSC.
You could view that as miscellaneous information.
And what's that might be you,
let's say you did an event for someone
and they paid you money or whatever it might be.
They have to fill out this form, report it to the IRS,
and they, you could see here that this person or
or whoever's getting this form, maybe it's you,
you got $10,000 and that no federal tax was withheld.
So you're gonna have to report this
and then also have to pay the proportion amount of taxes.
So once again, if you go into that situation where
before this 1099,
if you had made $50,000 from your day job,
well now you're going to have to add this $10,000 to
your income to get your taxable income at $60,000.
So this is, your taxes aren't going to increase by $10,000,
but your, they're gonna increase by some proportion of that.
But your taxable income is definitely going to increase
by $10,000 in this situation.
And like a 1098,
there's many different types of 1099s.
There's a 1099-INT short for interest,
which I get from my bank every year, which tells me
how much money I earned on interest in those accounts.
1099-DIV, which tells you about dividends
that you might've gotten from investments,
1099-G if you got payments
from the government that you need to report.
So there's more, we could go into more detail.
You can look up the details,
but the big picture is
1099, 1098 I should say.
These are things that you have paid many,
many times in the form of interest that might be deductible
to your taxable income.
And 1099, these are things that someone is paying you.
It's some form of income that you need to get taxed on.