At tax time, one of the forms that you might run into is the 1099 Form. The IRS uses this form to distinguish different types of income that may not come to you as part of a regular job. When you aren’t issued a W-2 for your income, chances are that you will be issued a 1099. Those who have paid you are responsible for issuing the 1099 as long as you made over $600.
You should keep your 1099 with your tax records and reconcile it with your own records. Additionally, realize that, even if you don’t receive a 1099 from a payer, you are still responsible for reporting the income to the IRS. Payers are supposed to send a copy of the 1099 to the IRS, so even if you are overlooked, there is a good chance that the IRS has a copy of the 1099. You should receive your 1099s by January 31. If you don’t receive your 1099s by then, you should call the payer and request it. In addition, if your 1099s are incorrect you should also request that the payer issue a corrected 1099. If they still do not correct the 1099, you should notify the IRS and also follow our instructions in “Missing Your W-2 Form, Corrected W-2s, and Multiple W-2s“.
Types of 1099s
The 1099 series of forms have different versions, each for a variety of purposes. The 1099-INT form is used to report interest income. Your bank or other financial institution might issue a 1099-INT form if you received interest income from a CD, or from a deposit account. If you have received debt forgiveness on a loan, this is considered income, and you will be issued a 1099-C. Income proceeds from real estate transactions make use of the 1099-S.
Several other 1099 forms exist for transactions such as Social Security benefits, distributions from cooperatives, government payments and more. However, one of the most common 1099 forms that you are likely to see is the 1099-MISC. This is the form that independent contractors receive from those who have paid them. If you work as a freelancer, you will receive a 1099-MISC form showing what you were paid. However, if a payer hasn’t paid you at least $600 in the past year, you might not get a 1099-MISC – but you still have to report your income. For a comprehensive list of types of 1099s, click on our “What is a 1099 Form?” blog post.
The New 1099-K
Of interest to many people right now is the new 1099-K form. This new form will be issued, starting with sales in 2011, by banks and other payment processors, to report gross receipts of payments. This includes payments received via PayPal. So, those who use PayPal, accept credit cards, and sell on eBay will have their income reported, officially by payment processors, to the IRS. We expect the IRS to move forward with the over $600 reporting threshold for 2023 and the upcoming filing season unless Congress passes a law to change the requirement.
It is worth noting, though, that not everyone in this situation will be hit with the new paperwork. If your total payment transactions are less than $20,000, and there are less than 200 transactions, they won’t have to be reported on the 1099-K. Technically, you should be reporting the income anyway, but this move is meant to help better enforce it.
Beware double reporting. You will need to make sure you have good records, though. Although the new reporting requirements shift the reporting responsibility from the customers to the merchants and banks, customers may not make the distinction and could report the same transactions twice. Also, realize that payment processors and other 1099-K reporters won’t subtract out charge-backs and fees – they only report gross receipts.
Instead of relying on 1099s for information about your income, you should keep good records. That way, if the IRS asks for information on the way you offset your income with expenses, or the double reporting issue, you have what you need to back up your position. As part of your due diligence, you should always keep a reconciled bank account for your business where you can track your income and expenses. In the end, you are responsible for paying your taxes based on what you were paid. If you underpay, the IRS will find out. If you overpay, the IRS may never know!
FAQs
There are different 1099 forms that report various types of income and how they were earned. These payments might be for interest, dividends, nonemployee compensation, retirement plan distributions. If you receive a 1099 form, it's your responsibility to report the income earned on your tax return.
What is a 1099 TurboTax? ›
Form 1099-NEC reports non-employee compensation to businesses or individuals that are paid $600 or more for that tax year. Examples of people who might receive a 1099-NEC form includes: Freelancers. Self-employed individuals.
What are the different IRS 1099 forms used for? ›
Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Form 1099-DIV, Dividends and Distributions. From 1099-INT, Interest Income. Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
What is the difference between a 1099 and a 1099-INT? ›
Types of 1099s
The 1099 series of forms have different versions, each for a variety of purposes. The 1099-INT form is used to report interest income. Your bank or other financial institution might issue a 1099-INT form if you received interest income from a CD, or from a deposit account.
What are the main differences between a 1040 and a 1099? ›
The 1040 Form reports all income received by taxpayers over the year. This includes wages, salaries, tips, interest and dividends, capital gains, and losses from investments. The 1099 Form, on the other hand, typically only reports freelance income or other non-employee compensation.
What does 1099 mean? ›
A 1099 employee is an independent contractor. The name derives from the Internal Revenue Service's (IRS) Form 1099, which contract workers must complete to report their earnings. Freelancers, consultants, self-employed workers, and sole proprietors are common types of 1099 employees.
What is the difference between a 1099 and a 1099-NEC? ›
Form 1099-MISC is for reporting payments like rent or prizes that are not subject to self-employment tax, while Form 1099-NEC is for reporting nonemployee compensation that is most likely subject to self-employment tax.
What is the 1099s form? ›
Form 1099-S is used to report the sale or exchange of present or future interests in real estate. It is generally filed by the person responsible for closing the transaction, but depending on the circ*mstances it might also be filed by the mortgage lender or a broker for one side or other in the transaction.
Who needs to file IRS Form 1099? ›
If you made a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS. Receipt of certain payments may also require you to file an information return to the IRS.
What are the rules for 1099? ›
The 2022 IRS 1099 rules for tax form 1099-NEC require business payers to report payments of $600 or more for income payments to nonemployees, if your business made direct sales of at least $5,000 of consumer products to a buyer without a permanent retail establishment for resale, and the amounts of backup withholding ...
1099 workers
Generally, businesses hire these workers to complete a specific task or work on a specific project as defined in a written contract. These workers are considered “self-employed,” so they pay their own taxes and provide their own benefits.
Who needs to fill out a 1099-INT? ›
REMICs, holders of ownership interests in FASITs, issuers of CDOs, and any broker or middleman who holds as a nominee a REMIC or FASIT regular interest or CDO must file Form 1099-INT.
Is 1099 G and 1099-INT the same? ›
The form 1099-G/INT is basically two forms in one. The information shows the amount of refund, credit or interest issued to you in a calendar year. If the form only shows over payment, that is your refund. If it also shows interest, you may have multiple data entries.
Will the IRS catch a missing 1099? ›
The IRS employs various methods to detect discrepancies in tax reporting, including the absence of 1099 forms. While the IRS does not catch every missing 1099 immediately, their sophisticated systems and data-matching capabilities make it likely that discrepancies will be identified over time.
When to issue a 1099? ›
Key Takeaways. Form 1099 is used to report certain types of non-employment income to the Internal Revenue Service. Certain types of non-employment income for freelance and independent contract work must be reported on a 1099–NEC. The deadline to mail 1099s to taxpayers is usually January 31.
What are the exceptions to the 1099? ›
Other exceptions
Employee payments of wages, military differential while on active duty, business travel allowances, (reported on Form W-2). Cost of current life insurance protection. Payments to certain tax-exempt organizations and governments. Payments made to or for homeowners from certain state programs.
What's the difference between a 1099 and a W-2? ›
If you work as an employee, you'll receive a W-2 form from your employer that shows your tax information for the year, but if you're an independent contractor or own your own business, you'll receive 1099 forms from clients with your tax information.
How does a 1099 affect my taxes? ›
When you work on a 1099 contract basis, the IRS considers you to be self-employed. That means that in addition to income tax, you'll need to pay self-employment tax. As of 2022, the self-employment tax is 15.3% of the first $147,000 in net profits, plus 2.9% of anything earned over that amount.
Who needs to file a 1099? ›
It's not just about tracking your payments; it's about following IRS rules. You're required to issue a 1099 if you've paid someone more than $600 for services, rent, prizes, or other income types. Each form type can have its own reporting threshold, and it is important to know what each one is.
What happens if I don't have a 1099 TurboTax? ›
If the missing 1099 is for self-employment earnings, and your net self-employment income is at least $400 for the year, you should file a Schedule SE with your amended return. The IRS uses this form to calculate your self-employment tax. This includes Social Security and Medicare taxes.
