Income that you receive from anyone other than an employer must be reported to the IRS after the end of the tax year, just like salary or wages. The payer reports the payment 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.
The 1099 is an information form, not a tax return, and it covers a wide spectrum of payment situations.
Definition and Examples of Form 1099
The tax code provides numerous 1099s, which 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, but one rule applies to all types: These forms represent income paid to the taxpayer.
The taxpayer must report this income when they file their tax return. If you don’t, the IRS will almost certainly tap you on the shoulder, because it also received a copy of the 1099 form, so it—or at least its database—is aware of the transaction.
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 circumstance where payment has changed hands.
Types of Form 1099
Some 1099s are far more common than others. These include payments for nonemployee compensation and “miscellaneous” income.
|Form||What It's Used for|
|1099-NEC||Independent contractor income|
|1099-DIV||Dividends and distributions|
|1099-R||Distributions from retirement plans, profit-sharing plans, pensions, annuities, insurance contracts, and more|
NEC stands for “nonemployee compensation.” The 1099-NEC reports money received for services provided by independent contractors, freelancers, and sole proprietors. Think of this form as the equivalent of the W-2 you would receive from an employer if you worked for wages or a salary.
The magic number here is $600. A payer must issue a 1099-NEC when they pay $600 or more per year for services to anyone who isn’t an employee.
The 1099-MISC form used to include payments made to nonemployees, but in 2020 these payments were segregated on their own Form 1099-NEC. For tax year 2020 and going forward, Form 1099-MISC covers only miscellaneous payments.
This form must be issued for health care 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.
Individual taxpayers do not have to issue and submit 1099-MISC forms when they make any of these types of payments, such as if they pay an attorney. The requirement is only for businesses and self-employed individuals.
The 1099-INT form reports interest income you received during the tax year, and this is another relatively common 1099. It does not report dividends—they 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.
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. In that case, it increases to $600.
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 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 contributions you made to traditional plans, such as a 401(k), although you made any contributions to Roth plans with after-tax dollars. So you’ll receive a 1099-R when and if 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. If any federal tax was withheld from any of these payments, it is also reported on the 1099.
These common forms of 1099s are just the tip of the iceberg. You’ll also receive a 1099 under numerous other circumstances:
- Form 1099-A: Reports the “acquisition or abandonment of secured property.” This basically means that you walked away from 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, ownership interest in the property. There’s no reporting threshold for this one.
- 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 get it from your broker.
- Form 1099-C: 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 with the lender for $5,000 and the lender wrote off the other half. The IRS takes the position that this forgiven debt counts as income. The reporting threshold is $600 for this 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 report state tax refunds here, however, unless you claimed an itemized 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 made 200 or more transactions and you received payments of $20,000 or more for goods or services via third-party services such as credit card processors or merchant card services. A very active Airbnb listing for which hosts have more than 200 guest bookings per year would be an example of side income that would lead to issuance of a 1099-K. Ride-sharing drivers will also receive a Form 1099-K for gross ride receipts accrued during the tax year, in addition to a Form 1099-MISC.
- Form 1099-LTC: Reports long-term care benefits.
- Form 1099-Q: Reports payments you might have received from a qualified education program—think contributions to Coverdell Education Savings Accounts or 529 plans on your behalf. You’ll receive this 1099 if you’re the plan’s designated beneficiary.
- Form 1099-S: Reports proceeds from selling real estate, if they exceed $600 in total.
- Form 1099-SA: Covers medical and health savings account distributions.
- Form RRB-1099: Reports railroad retirement benefits.
- Form SSA-1099: Reports Social Security benefits.
Where to Get a Form 1099
Independent contractors, freelancers, and sole proprietors should receive their 1099-NEC forms from their payers by Feb. 1 of the year following the tax year. For example, you should have received your forms by Feb. 1, 2021, for the 2020 tax year. The same date applies to 1099-NEC recipients and to most other 1099 forms.
What to Do If You Don’t Receive a Form 1099
In some cases, the business that paid you might fail to send you the form. Reach out to the business first to see if you can get a replacement Form 1099. If you receive one but you think the information is wrong, ask the payer for an amended form.
If you’re missing a Form 1099-R, you can submit IRS Form 4852 instead.
How to File Form 1099
Independent contractors, freelancers, and sole proprietors should include their 1099 information when completing Schedule C to calculate their net business income. Enter the result appearing on Schedule 1, and ultimately on your Form 1040. Schedule 1 reports “Additional Income and Adjustments to Income” and it’s the catchall form for many 1099 forms.
In most cases, you don’t have to submit the 1099 with your tax return because the IRS already has a copy.
Independent contractors, freelancers, and sole proprietors must report all business income, even if they don’t receive a 1099-NEC form because a particular client didn’t pay them $600 or more.
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. If you’re unsure, consider touching base with a tax professional.
- There are numerous types of 1099 forms, but they all have one thing in common: They report earnings from sources other than employment.
- Forms 1099 are provided by the payer to the IRS, with a copy sent to the recipient of the payments. These forms alert the IRS that this money has changed hands.
- Taxpayers generally don’t have to file their 1099s with the IRS because the IRS already has the form, but they do have to report the income on their tax returns.