Form 1099

What is Form 1099? 

Form 1099 is a type of tax form from the Internal Revenue Service (IRS). It is a document that indicates any income paid to a person coming from any person or entity other than their employer. Simply put, if you were paid money by someone and that person is not your employer, it is recorded in Form 1099. 

What is the purpose of Form 1099? 

Form 1099 is used to provide information to the IRS about different incomes that taxpayers receive aside from their regular salary income. Form 1099 is used to keep a record of other sources of income aside from your employer. In this way, taxpayers can accurately report all their income to the IRS. With the information indicated in the 1099 forms submitted to the IRS, they can compare these with the data on other submitted IRS forms. 

What are the different types of Form 1099? 

There are different versions of Form 1099 used to report different types of income that are not from the taxpayer’s regular employer. Here are some of the most common types of Form 1099: 

• Form 1099-DIV - for income from dividends, exempt-interest dividends, capital gains, stock distributions, $600 or more in money or other property as part of a liquidation, and other distributions valued at $10 or more in money or other property. 
• Form 1099-INT – for interest income of at least $10 or more. This is sent by a financial institution. 
• Form 1099-B – for proceeds from broker, barter exchange transactions, and sales of stock. 
• Form 1099-C – for income from any cancellation of debt. This is reported as taxable income. 
• Form 1099-G – for income from unemployment compensation, state or local income tax refunds, credits, agricultural payments, and taxable grants. 
• Form 1099-R – for income of $10 or more from profit-sharing, retirement plans, individual retirement plans (IRAs), annuities, pensions, and survivor income benefit plans. Additionally, this form is also for permanent total disability payments under life insurance contracts, charitable gift annuities, and insurance contracts. 
• Form 1099-SA – for income made from health savings accounts, Archer Medical Savings Account (Archer MSA), and Medicare Advantage Medical Savings Account (MA MSA). 
• Form 1099-MISC- for income of $10 or more in royalties or broker payments instead of dividends. Also, this form is for income of at least $600 in prizes, awards, rents, and other types of income that cannot be classified in the other types of Form 1099. Furthermore, Form 1099-MISC is used to report direct sales of at least $5,000 of consumer products to buyers for resale in any place other than a permanent retail establishment.
• Form 1099-NEC – to report nonemployee compensation. 

Because there are multiple types of Form 1099, a person may receive different Form 1099 in a year, depending on their sources of income. Although there are many types, their purpose is essentially the same – to provide IRS accurate information on the types of income a taxpayer received for the year. 

Is Form 1099 the same as Form W-2? 

Although both are IRS tax forms, Form 1099 and Form W-2 are not the same. Form W-2 is given to employees to report income and payroll taxes that are withheld from their paycheck. On the other hand, Form 1099 is given to a person who is an independent contractor, self-employed, or a freelancer. 

Who is required to file Form 1099? 

The responsibility of completing Form 1099 generally rests on the individual or entity who paid for services. Aside from filling it out, the payer must also send one copy of Form 1099 to the IRS and one copy to the person they made the payments to. The deadline for mailing Form 1099 is January 31. Form 1099 may be sent via mail or electronically. 

Do I need to attach Form 1099 to my tax return? 

No, Form 1099 is considered an “information return” by the IRS. It is not required as an attachment to a taxpayer’s federal tax return. If you did not receive a copy of Form 1099, you may reach out to the person who is supposed to give you a copy. However, if you generally keep track of how much you earn from other sources of income aside from your employer, you can include the information on your federal tax return. 

Keeping a copy of your Form 1099 is helpful for you to monitor the different types of income you have and keep your taxes updated and accurate. In case of an audit, your personal records of Form 1099s will be useful. With this being said, it is recommended that you have a copy of Form 1099 for your personal record.