Understanding business taxes can be daunting, especially when it comes to the different types of 1099 forms. Besides a regular paycheck or what is reported on a W-2 form, there are many ways to earn income throughout the year.
Pew Research reports that 16% of Americans have earned income by participating in the gig economy. This income is taxable, and the IRS needs to know about it. You may be familiar with Form 1099-MISC, but there are nearly two dozen types of 1099 forms, each meant for recording information about a distinct type of income.
Below, we will offer an overview of who should be issuing and receiving different types of 1099 forms and take a closer look at some of the more common types you might encounter in the course of doing business.
What Are 1099 Forms?
Each type of 1099 form is an informational return meant to notify the IRS of any income outside of W-2 earnings. Since payments reported on a 1099 form do not encompass employee compensation, they typically do not include tax withholding. Occasionally, there may be an issue with the taxpayer ID where backup withholding is necessary, which should be indicated on the form. Those forms, which include taxpayer ID numbers and the amount earned, are sent by the taxpayer directly to both the IRS and the payee.
In most cases, the payer must send the recipient a copy of a 1099 form by Jan. 31 of the following year when reporting nonemployee compensation payments, March 31 if they’re filing electronically and not reporting nonemployee compensation, or the last day of February if they’re filing by paper and not reporting such compensation. The payee must then report that income on their tax return, where it will be matched with IRS records.
A good practice is to keep an updated W-9 on file so that all 1099s have your current address and tax ID. Similarly, always ask for a W-9 upon hiring a contractor to confirm the need for a 1099 and have the correct information on file.
Who Needs to File a 1099 Form?
Businesses of all sizes must issue 1099 forms when necessary. Each form must be filed on time and include both the amount paid and the correct taxpayer ID number, or else the payer could incur significant penalties.
While there are some exceptions, in general, payments made to corporations, limited liability companies (LLCs) treated as S or C corps, tax-exempt organizations, or for rents do not need to be reported on 1099 forms.
Sole proprietors, meanwhile, must also file 1099s for any payments issued during the course of ordinary business, but not for any personal payments. For example, a sole proprietor may hire a bookkeeper for their business, in which case they would issue a 1099-NEC; however, they would not issue one to their dog walker. Likewise, sole proprietors should report any 1099 income they’ve earned on Schedule C of Form 1040.
Types of 1099 Forms
The following 10 examples are common types of 1099 forms. Consult the IRS guidelines for a complete list of 1099s and instructions for each form.
|10 Common 1099 Forms||Description||Who Issues 1099||Amount||Due to Payee||Due to IRS|
|1099-B||Proceeds from broker and barter exchange transactions||Broker; barter exchange||Any amount||Feb. 15||Feb. 28|
|1099-C||Cancellation of Debt||Lender; creditor||$600+||Jan. 31||Feb. 28|
|1099-DIV||Dividends and distributions||Bank; financial institution||$10+ (600+ for liquidations)||Jan. 31||Feb. 28|
|1099-G||Certain government payments||Payer; government agency||$10+||Jan. 31||Feb. 28|
|1099-H||Health coverage tax credit advance premiums||Health insurance provider||Any amount||Jan. 31||Feb. 28|
|1099-INT||Interest income||Bank; financial institution; other entity||$10+ ($600+ in some cases)||Jan. 31||Feb. 28|
|1099-K||Payment card and third party network transactions||Third party network||$20K+ and 200 transactions; $600+ beginning 2022||Jan. 31||Feb. 28|
|1099-MISC||Miscellaneous payments||Payer||Variable ($10+ for royalties, $600+ for attorney fees, etc.)||Jan. 31||Feb. 28|
|1099-NEC||Nonemployee compensation||Payer; corporation||$600+||Jan. 31||Jan. 31|
|1099-R||Distributions from retirement accounts||Account custodian||$10+||Jan. 31||Feb. 28|
Common 1099 Forms Explained
Form 1099-B has two main uses. The first and most common use is to report capital gains (or losses) from the sale of stocks, bonds, securities, and property handled by a broker. The second use is to report barter exchange transactions.
Small businesses and individuals can still barter for goods and services. Trades often go through a third party called a barter exchange, which acts as a bank and facilitates bartering among multiple entities.
The barter exchange will report a fair market value of the barter income received throughout the year via Form 1099-B.
If you’ve had a debt of $600 or more canceled during the reporting year, the creditor must issue Form 1099-C.
If you or your business received dividends or capital gains of more than $10 from a taxable account, you’ll receive Form 1099-DIV from your brokerage or financial institution. This is reportable income, even if those shares were reinvested.
Payments from the federal, state, or local government of $10 or more for credits, refunds, or offsets are reported to the IRS using Form 1099-G. Another common use for this form is for unemployment compensation of $10 or more.
You’ll need this form if you or any qualifying family members received advance payments for health insurance.
Separate from dividends, if you received more than $10 in interest from a bank or credit union, you’ll receive Form 1099-INT.
Form 1099-K applies for payments received via a third-party network or credit/debit transactions. Examples include drivers for rideshare networks, Etsy shop owners, Airbnb owners, and anyone who accepts credit or debit cards for their business.
Currently, you will receive Form 1099-K if you’ve made over $20,000 and performed more than 200 transactions. However, due to a provision in the American Rescue Plan Act, for any settled payment transactions beginning Jan. 1, 2022, Form 1099-K requirements will drop solely to a $600 aggregate reporting threshold. Given the complexity of this form, it’s best to record all of your own transactions and carefully review your Form 1099-K with a certified tax preparer.
1099-MISC is one of the most common 1099 forms. It is used to report a variety of miscellaneous payments to individuals.
Prior to the 2020 tax year, this form was used to report payments to independent contractors, but you must now issue 1099-NEC for any nonemployee wages.
In general, the payer should issue Form 1099-MISC to any individual who has received at least $10 in royalty income and at least $600 for a variety of payments, such as:
- Rental income (as long as it is paid to an individual, such as a property manager)
- Prizes or awards
- Fishing boat proceeds
- Medical and health care payments
- Gross proceeds paid to attorneys
Form 1099-NEC is another common type of 1099 and is used to report a certain level of income paid outside of W-2 wages. Sole proprietors and companies of all sizes will often use contractors or freelancers for a range of different jobs, such as bookkeeping, consulting, or handiwork. In this case, those businesses would issue a 1099-NEC to anyone they paid more than $600 for a service.
Nonemployee compensation can include:
- Commissions for nonemployee salespeople
- Prizes and awards for services
Though businesses are required to issue Form 1099-NEC only for payments over $600, the payee is still required to report that income on their personal return.
You will receive Form 1099-R if you received a distribution of retirement benefits from a retirement plan, even if it was only $10. You’ll also receive Form 1099-R if you initiate a rollover of your plan from one custodian to another, though this is not considered a taxable event.
Frequently Asked Questions
What types of businesses get 1099 forms?
Vendors or subcontractors, such as individuals, partnerships, or LLCs, that have been paid at least $600 for their services must receive Form 1099-NEC, Nonemployee Compensation. However, while there are some exceptions, like payments to an attorney, you typically don’t have to issue 1099-NEC forms to C corps and S corps (or LLCs that are registered as such).
What types of payments do not require a 1099?
There are exceptions with each type of 1099 form, and not all payments are required to be reported to the IRS by the payer. For example, payments under $600 to an individual will not need 1099-NEC reporting, even though the payee must still report that income on their personal return. Each form has its own thresholds and exceptions, so it is best to talk to a tax preparer in order to understand your obligations.
How many types of 1099 forms are there?
There are nearly two dozen types of 1099 forms, and some are more common than others. Since each type of 1099 form has specific rules and exceptions, it is best to consult the IRS websites for specific answers and guidelines and to use a certified tax preparer.
Pew Research Center. "The State of Gig Work in 2021."