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Businesses and organizations have a variety of options for filing 1099 forms.
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Form 1099 is a tax document used to report certain types of income to the IRS.
There are many different types of 1099 forms that cover a variety of types of income, such as non-employee work and retirement distributions.
You’re liable for paying taxes on all of your income, regardless of whether you receive a 1099 form.
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If you had any sort of income this year, you’ll likely be receiving forms reporting that income for the corresponding tax year. The most common is a W-2, since it applies to part-time and full-time employment. But you may also receive a 1099 form if you’ve earned money from other sources, such as interest from your bank, from investments, contract work, or even disbursement from a retirement fund.
Here’s a look at what 1099 forms are, when you can expect to receive them, and why they are important when you file your taxes.
What is a 1099?
A 1099-MISC is a form that reports various types of income for Tax Day. It’s filed by a business or organization that pays pre-taxed money to a recipient, which could be an individual or another business.
Its purpose is to let the government know how much money was paid and to whom so the recipient can pay the appropriate tax on that income. One copy is filed with the IRS and another is sent to the recipient of the money. The recipient then uses that form to report their income to the IRS when they file their tax returns.
For example, suppose you sold off 100 shares of stock and earned $1,000 in profit from the sale. The brokerage that handled the transaction would file a 1099-B form with the IRS to report the sale and resulting money it paid to you. They would also send you a copy of the form with all the information it sent the IRS so you can report the $1,000 as taxable income.
What is a 1099 used for?
A 1099 simply reports income to the government. Because there are so many types of income and ways they are taxed, the IRS offers several 1099 forms for specific purposes, each with their own minimum thresholds for being required to file. Here is a quick look at the most-common types of 1099 forms and the minimum income required for each.
Form
Type of income
Minimum needed to report
1099-DIV
Dividends
$10
1099-INT
Interest
$10 to $600, depending on circumstance
1099-MISC
Royalties, broker payments, prizes, rents, etc.
$10 to $600, depending on circumstance
1099-NEC
Non-employee payments
$600
1099-G
Certain types of government payments
No minimum
1099-R
Retirement income
$10
1099-B
Broker or barter exchanges
No minimum
1099-S
Real estate transactions
No minimum
1099-K
Payment card and third-party network transactions
$20,000 in aggregate payments and 200 transactions (2021). For 2022 this has been lowered to $600 in aggregate payments.
Businesses and organizations have a variety of options for filing 1099 forms. Generally, they will collect a W-9 form from the the recipe nt of the income. This is an informational form that provides an employer identification or Social Security number, name, address, and other essential information needed for completing a 1099 at the end of a year.
After determining the amount of income to be reported, the filer can hire a tax professional or use online tax software to generate and often file the appropriate forms. They can also create an account with the IRS to manually create the forms and file them. There are even options if you prefer to use paper forms and mail them directly to the IRS.
Copies of filed 1099 forms are sent to the recipients of the reported income. These can be delivered electronically or by regular mail. In addition to checking your mailbox at home, you should keep an eye on your email.
Quick tip: If you don’t get a 1099 for income you received, you still have to report it on your tax return. Don’t rely just on what 1099s you actually get when calculating income for tax purposes.
“The taxpayer is required to report the income whether or not they receive a 1099 form,” says Beth Logan, an Enrolled Agent with Kozlog Tax Advisers. “The 1099 form just tells the IRS that the income should appear on the recipient’s tax return.”
What to do if you expect to get a 1099
When you receive any type of income that would cause an organization to file a 1099, you should plan your finances throughout the year to ensure you can pay the necessary taxes.
“You can pay in a variety of ways,” says Logan. “You can pay estimated taxes. If you have a W-2 job, you can have additional deductions to cover any extra taxes. You can also wait and pay with your tax return, but that might result in extra interest for the delay in payment.”
Organizations have to file their 1099s for the year by January 31 for the previous tax year. If you know you received income that did not have taxes withheld and you haven’t gotten a 1099 by the middle of February, contact the paying organization to check on the form’s status.
It is also important that you keep a record of all your income so you can match it up with what is reported on the 1099s you receive. This can help protect you against errors a payer may make in a 1099 that could result in increased tax liability.
“Taxpayers should keep their own record of income received, as the receipt of a 1099 is not proof of the receipt of income,” says Steven J. Weil, president and tax manager of RMS Accounting in Fort Lauderdale, Florida. “If a taxpayer has records to prove that the 1099 information is incorrect, the IRS will have to review and accept that income. But in the absence of taxpayer records to the contrary, income reported on a 1099 will generally stand.”
Types of 1099 forms
There are a lot of different categories of income you might have in a year to which a 1099 form may apply. Here’s a look at the different types of 1099 forms you might receive:
1099-DIV: Used mostly by banks and other financial institutions, this form reports dividends and other similar financial distributions, including those from capital gains and exempt interest. 1099-INT: This form covers three situations involving interest income: amounts paid of at least $10 reportable in boxes 1, 3, and 8 of the form or at least $600 in the course of doing business; amounts withheld and paid any foreign tax or interest; and amounts from federal income tax withheld and not refunded under backup withholding rules. 1099-MISC: This used to be for non-employee payments over $600, but as of 2020 is for reporting royalties and broker payments, rent, prizes and awards, medical and health payments, crop insurance proceeds, payments to an attorney, and other kinds of income. 1099-NEC: If you work for a company as a contractor or under another non-employee status and earn at least $600, you’ll get a 1099-NEC. It also applies if any federal income tax was withheld from your income under the backup withholding rules.1099-G: This form reports income from certain federal, state, and local government sources, such as unemployment, state tax refunds, or taxable grants. 1099-R: When you get distributions from a pension, annuity, IRA, profit-sharing plans, insurance contracts, or other retirement income plans, expect to get a 1099-R. This also includes survivor income benefits, certain disability payments, and charitable gift annuities. 1099-B: This form applies when you’re working with a broker who has sold stocks, commodities, futures, foreign currency contracts, short sales, or you have received cash, stock, or property the broker has a stake in. It also applies when you exchange property or services in a barter arrangement. 1099-S: This form applies to income from real estate transactions, whether through actual sale, exchange of property, or other arrangements. 1099-K : This form applies to income received from third-party payments, such as credit/debit card and other payment services.
The bottom line
A 1099 is an important financial form that reports income to the government and helps determine your tax liability. It’s important to keep track of all your income throughout the year and not wait to see what 1099s you are sent to estimate how much you owe in taxes. You may or may not get all the 1099s you should for the money you received. Regardless, you are still responsible for paying tax on that income.
It is also important to keep track of any expenses that may help reduce your gross income as reported on the 1099. For example, if you did work as a 1099 contractor you may have some expenses that may help offset the income received.
Setting aside money from income you receive that has not had taxes withheld is a good idea. Consulting with a tax professional to help time out your savings and deciding if making payments periodically is also a smart move. When you have 1099s coming to you at the end of the year, a little planning can make a world of difference.