vitapix / Getty Images Income you receive from any sources other than an employer must be reported to the IRS after the end of the tax year, just like the income from your job. The payer reports the payments to the IRS, and the payee must then report the income on their tax return. Taxes typically aren’t withheld from this type of payment, whether it’s from self-employment or investments, so you’ll have to pay the tax on it at tax time. The 1099 is an information form, not a tax return, and there are different versions that cover a wide spectrum of payment situations. For example, you may receive a Form 1099-MISC if you received more than $600 in cash prizes, or a Form 1099-DIV if you received taxable dividends.
How Does Form 1099 Work?
The tax code provides numerous 1099s that are differentiated by numbers or letters tacked on at the beginning or end of the form number. Many types of 1099 forms are subject to their own unique rules. As a taxpayer, you must report any 1099 income when you file you tax return. The IRS will contact you if you don’t, because it will have received a copy of the 1099 form(s), so it will be aware of the transaction(s).
Who Uses Form 1099?
Anyone who receives income that doesn’t result from an employer/employee relationship might expect to receive a copy of a 1099 form, depending on the amount of that income. A Form 1099 is issued to self-employed individuals, to taxpayers who have received interest or dividends from investments, and to people in any other circumstances where payment has been received.
Types of Form 1099
Some 1099s are far more common than others. These include payments for non-employee compensation and “miscellaneous” income. The magic number here is $600. A payer must issue a 1099-NEC when it pays $600 or more per year for services to anyone who isn’t an employee.
Form 1099-MISC
The 1099-MISC form used to include payments made to non-employees, but as of the tax year 2020, these payments have been segregated on their own Form 1099-NEC. As a result, Form 1099-MISC covers only miscellaneous payments. This form must be issued for healthcare services provided and for legal services delivered by attorneys. It also covers rents paid and prizes won, and it reports a number of agricultural and fishing transactions as well. The threshold for issuing a 1099-MISC is $10 for payments made by brokers that would normally be considered tax-exempt interest or dividends, and it increases up to $5,000 for merchandise sold for the purpose of resale to any business that doesn’t maintain a permanent, brick-and-mortar retail storefront.
Form 1099-INT
The 1099-INT form reports interest income you received during the tax year. It does not report dividends, which have their own 1099. You’ll typically receive a 1099-INT from your bank or credit union if you hold accounts that produced interest income of $10 or more. You’ll also receive one if any foreign taxes were withheld and paid for from your interest income, or if your earned interest was subject to backup withholding.
Form 1099-DIV
This is the form you’ll receive if you earned dividends and other similar distributions. You’ll typically receive a Form 1099-DIV if you own stock or mutual fund portfolios. This reporting threshold is $10 as well, unless you’re being paid because the corporation is liquidating. (It increases to $600 in that case.) You will not receive a Form 1099-DIV if you sell stocks. This form only reports dividends and other distributions representative of a corporation’s earnings.
Form 1099-R
Form 1099-R pertains to retirement benefits you received in excess of $10. You might have been making contributions to one or more retirement funds throughout your working life. You didn’t pay income tax on any contributions you made to traditional plans, such as a 401(k), although any contributions to Roth plans were made with with after-tax dollars. You’ll receive a 1099-R if and when you take distributions from any of your traditional retirement savings plans. You must report the distributions as income in the year you take them. Form 1099-R also reports profit-sharing and pension plan distributions, payments resulting from insurance contracts, survivor benefits, and those received from annuities. Any federal tax that was withheld from any of these payments is also reported on the 1099.
Other Types of 1099 Forms
These common forms of 1099s are just the tip of the iceberg. You’ll also potentially receive a 1099 under numerous other circumstances.
Form 1099-A
This 1099 reports the “acquisition or abandonment of secured property.” This basically means that you walked away from a property, relinquishing it to the lender in lieu of paying a debt. You’ll receive this form even if you gave up some, but not all, of your ownership interest in the property. There’s no reporting threshold for Form 1099-A.
Form 1099-B
Form 1099-B reports income received from broker or barter exchanges in any amount. This is the form you’ll receive if you sell stock. You’ll receive it from your broker.
Form 1099-C
Form 1099 reports cancellation of debt. You’ll receive this information return if a lender forgives debt that you owe, such as if you settled a $10,000 credit card balance for $5,000, and the lender forgave the other half. The IRS takes the position that forgiven debt counts as income. The minimum reporting threshold is $600 for this type of 1099.
Form 1099-G
The “G” stands for “government.” You’ll get this one if you received unemployment compensation or a tax refund of $10 or more from your state. This 1099 does not include Social Security benefits. Income from that source has its own 1099. You would not include state tax refunds reported here, however, unless you claimed an itemized federal tax deduction for payment of state taxes in a previous year.
Form 1099-H
You’ll receive this form if health insurance advance payments were made on behalf of you or your qualifying family members.
Form 1099-K
This form is issued if you received payments exceeding $600 for goods or services via third-party services, such as credit card processors, merchant card services, or even PayPal. Ridesharing drivers will receive a Form 1099-K for gross ride receipts accrued during the tax year, in addition to a Form 1099-MISC. This $600 limit was significantly reduced from $20,000 and 200 transactions, effective January 1, 2022. The $600 limit applies regardless of the number of transactions beginning in 2022.
Form 1099-LTC
Form 1099-LTC reports long-term care benefits.
Form 1099-Q
Form 1099-Q reports payments you might have received from a qualified education program. Think contributions to Coverdell Education Savings Accounts or 529 plans that were made on your behalf. You’ll receive this 1099 if you’re the plan’s designated beneficiary.
Form 1099-S
This 1099 reports real estate sales or exchanges, regardless of whether the transaction is currently taxable. A de minimis transaction for less than $600 in total need not be reported.
Form 1099-SA
Form 1099-SA covers any medical and health savings account distributions.
Form RRB-1099
This 1099 reports any railroad retirement benefits.
Form SSA-1099
Form SSA-1099 reports any Social Security benefits you received during the tax year.
Where to Get a Form 1099
Independent contractors, freelancers, and sole proprietors should receive their 1099-NEC forms from their payers by January 31 of the year following the tax year. You should have received your 1099-NEC for tax year 2021 from your client by January 31, 2022. The same date applies to most other 1099 forms.
What to Do If You Don’t Receive a Form 1099
The business that paid you might fail to send you the form. Reach out to it first to see whether you can get a replacement Form 1099. Ask the payer for an amended form if you receive one, but you think the information is wrong. You can contact the IRS at 800-829-1040 or visit an IRS Taxpayer Assistance Center if you can’t get either situation straightened out with the payer. Taxpayer Assistance Centers have been operating by appointment only since the onset of the COVID-19 pandemic.
How to File Form 1099
Independent contractors, freelancers, and sole proprietors should include their 1099 information when they’re completing Schedule C to calculate their net business income. Enter the result on Schedule 1, and then transfer the total of Schedule 1 to your Form 1040. Schedule 1 reports “Additional Income and Adjustments to Income,” and it’s the catch-all form for many 1099 forms. You don’t have to submit the 1099 with your tax return in most cases, because the IRS already has a copy. With so many 1099s out there, it shouldn’t come as a surprise that there’s no one-size-fits-all answer for how to include this information on your tax return, but most tax software programs are set up to accommodate most of them. Consider touching base with a tax professional if you’re unsure or have any questions.
