The IRS Form 1099 can be an important part of filing annual income taxes for some earners, such as freelancers, independent contractors, some retirees, and income-earning stock investors. The 1099 form captures information about income earned from a non-employer source or salary. It can be filed by either a company or individual who paid the recipient of the form.
But these documents can at times get confusing because of the multiple varieties of 1099s. These can include 1099-MISC, 1099-DIV, 1099-INT, and more. Each shows a different sort of financial transaction that occurred in a given tax year.
To get help understanding these critical tax documents, read on. While by no means comprehensive, you’ll learn how IRS 1099 forms work in general, including:
• What is IRS Form 1099?
• What are the different kinds of 1099s?
• Who gets a 1099?
• How do you calculate your tax deductions?
What Does IRS 1099 Form Document?
IRS Form 1099 reports income earned from self-employment, interest, dividends, and other sources. 1099 recipients can get the IRS form from the company, state, individual, or organization that paid them potentially taxable income.
Since this document can contain information about possibly taxable income (pre-deductions), it’s worth holding on to all 1099s received — whether printed or sent electronically. IRS 1099 forms can be helpful when filing both state and federal income taxes. Knowing how to read these forms can play a key role in understanding your taxes.
Who Gets a 1099?
Should you expect a 1099? Well, it depends. If you do any work as a freelancer or an independent contractor, then it’s likely that you will receive one for pretax, non-employee compensation.
More specifically, the answer is yes if you’ve received at least:
• $600 in business rental income
• $600 for services from a person or business that is not your employer
• $600 in prizes or awards
• Other non-employee income — including $10 or more in royalty income, $600 of business attorney fees, or $5,000 in direct sales.
Another common reason you may receive an IRS Form 1099 is investment income. If you own bonds, dividend-paying stocks, or mutual funds that produce income, it’s likely that you’ll receive a 1099 that outlines the income for which you’ll be liable. Even if you reinvest those dividends immediately, you’ll have to pay income tax on dividends that have been paid out.
Like an IRS W-2 form, a 1099 reflects your income for a given year. But a W-2 reflects income from wages or a salary, which come to you with the taxes already having been deducted. A 1099 shows gross, or raw, income that has yet to be taxed. Some (but not all) recipients may qualify for further tax deductions on the income listed on the 1099 form.
Different Types of 1099 Forms
What is a Form 1099? As briefly mentioned above, there are multiple types of 1099s, reflecting different kinds of money that you may receive in a given year. Some might show active income, such as money you earned as a freelancer or by starting a side hustle. Others might capture passive income, money that’s earned on, say, renting a second home as an Airbnb. You might also have received funds that are interest earned on your stock portfolio.
Whether you’re filing taxes for the first time or have been doing so for years, keep reading to learn a bit more about these different forms.
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1099 Forms for Earned Income
Here are some of the 1099 forms you may receive as you prepare for tax season, reflecting income earned as a non-employee in the previous year:
• 1099-NEC: The IRS implemented this form in 2020 for non-employee compensation (hence the initials NEC). It is replacing the 1099-MISC for many non-employee workers. It is what you may receive if you freelanced for clients, are a self-employed contractor, or if you have a side gig of some sort.
• 1099-K: This form currently works as a way of tracking income for those who received $20,000 in income from at least 200 transactions via, say, PayPal, eBay, or a credit card. In future years, the IRS plans to have 1099-Ks issued for those who take in more than $600 in these ways.
1099 Forms for Passive Income
What’s a 1099 for passive income? First, you need to know that passive income is money you earn from such endeavors as a limited partnership, a rental property, or another enterprise that doesn’t require active participation.
The 1099 forms you may receive to show earnings of this kind include:
• 1099-MISC: In the past, independent contractors and freelancers would receive this from those who have paid them at least $600. Now, that kind of income, which is subject to self-employment tax, is shared via a 1099-NEC (see below). The 1099-MISC has shifted to show income that is not subject to self-employment taxes, such as rent or prize money.
1099 Forms for Portfolio Income
Next, explore what is a 1099 form for portfolio income. Some people would say that your investment portfolio’s gains are a kind of passive income since you aren’t actively working to make the money; others would disagree.
That noted, here you’ll learn about 1099 forms for portfolio income as a separate entity from passive earnings such as earning money on a rental property you own.
The 1099-DIV and 1099-INT are perhaps the most pertinent types of 1099s for anyone who invests. It’s important to note that anyone who takes in more than $1,500 in interest or dividends during a given year will also have to file a Schedule B as part of their tax return.
Investment dividends and interest are both considered income and are taxed at your income tax rate. At the same time, capital gains made on short-term investments may also be taxed at your income tax rate.
It’s important to factor in any returns you’ve made on investments held for less than a year when tallying your tax return at the end of the year.
The 1099-DIV and 1099-INT are perhaps the most pertinent types of 1099s for anyone who invests.
Next, a closer look at the 1099s that are used to show earnings:
• 1099-B: Are you an income-earning investor? If you trade or barter securities, this form is the official record of the income you received on those trades, and it’s usually filed by the broker or clearing firm. This form can help you manage capital gains and losses on your income tax return.
• 1099-DIV: Annual dividends and distributions from any type of investment will show up on this form.
• 1099-INT: This reports interest income. It usually comes from a financial institution for interest income from a CD or savings account, as well as from Treasury bills and U.S. Savings Bonds.
• 1099-R is used to report distributions you may receive from retirement plans, IRAs, profit-sharing plans, annuities, and the like.
Other 1099 Forms You May Receive
In addition to the 1099 forms already noted, there are several more you may well encounter. These include:
• 1099-A: You’ll receive this form if your mortgage lender canceled some or all of your mortgage, usually because of a foreclosure.
• 1099-C: Debt forgiveness is considered income, and 1099-C tracks that income. (There’s an IRS Form 982 which, in certain circumstances, may allow you to exclude this income from your return.)
• 1099-G: If you received unemployment benefits or any other money from a state, local, or federal government, such as a tax refund or credit, you may receive one of these.
• 1099-S: Income earned on real estate transactions will be reflected in this form.
• SSA-1099: This reflects the Social Security payments you’ve received in the past year.
Recommended: What Triggers an IRS Audit?
Tabulating Tax Deductions for the Year
While wage and salary income are usually taxed before being disbursed to employees, other types of income usually aren’t. But that fact doesn’t mean 1099 recipients necessarily owe taxes on all of the income listed on the IRS 1099 form.
For instance, freelancers and independent contractors generally can, or must, pay estimated quarterly taxes to avoid a big tax bill each year. In these cases, they may even receive a tax return on their 1099-reported income (assuming overpayment).
At the same time, some 1099 recipients could have deductions that offset the income. Simply put, deductions reduce tax liability by lowering one’s taxable income for a given year. The standard deduction for tax year 2023 for a single person is $13,850 and, for joint filers, is $27,700. But itemized deductions might include:
• Student loan interest
• Mortgage interest
• Qualifying charitable donations
• Medical expenses (for those who itemize deductions).
If you’re a freelancer or independent contractor, you may be able to deduct a wide range of business-related expenses — including a home office, supplies, travel, and client dinners.
Regardless of which deductions you claim, it’s important to invest time and thought on your tax return, perhaps using tax software or consulting with a tax professional, to make sure you’re neither overpaying nor underpaying your taxes. And also, of course, to make sure you aren’t missing the tax-filing deadline.
One more tip on getting organized: It can also be wise to check this year’s forms against the documents you received the previous year, to make sure you aren’t missing any tax forms.
For additional specifics on this tax filing season, 1099 recipients may want to check out IRS Filing and Payment Deadlines Questions and Answers page or contact the IRS at 800-809-1040 toll-free for help.
Tips for Filling Out a Form 1099
If you receive a 1099, you don’t need to fill it out in any way; you just need to account for it when filing your tax return.
If, however, you are the person responsible for filling it out, keep these tips in mind:
• The payer information is where the name, address, taxpayer identification number (TIN), and other details about the issuing entity are added.
• The recipient information is where you’ll fill in the specifics about the person who will receive the form. This is typically their name, address, and TIN, which may be a TIN, EIN, or Social Security number (SSN).
• Carefully fill out such applicable areas as non-employee compensation and federal and state income tax withheld when completing 1099-NEC forms.
Recommended: How to File for a Tax Extension
IRS Form 1099 documents income earned from non-employer sources and can be used when filing and calculating one’s annual tax liability. It’s commonly sent to freelancers, independent contractors, investors, Social Security recipients, and those whose forgiven debts count as taxable income.
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What should I do if I do not get all of my 1099 forms?
If you don’t receive your 1099 forms by January 31st, which is the date they should be issued by, you might wait a couple of days to see if they arrive by mail. If not, reach out to the issuer to request your form; perhaps it can be downloaded quickly. If it is February 15th and you still don’t have the form, you can try to get the information you need from other sources (such as a bank statement) or else call the IRS helpline at 800-829-1040. Some services, such as TurboTax, may allow you to account for a missing 1099 while using their software.
What should I do if I make an error on a 1099 form?
If you receive an incorrect 1099 and inform the issuer, they can create and file a corrected version, which means both you and the IRS will have the updated document. If you are the issuer, it’s your responsibility to rectify the error and re-issue the form.
Is a 1099 the same as a W-2?
A W-2 is a form issued to employees to show their earnings and the taxes withheld. On the other hand, 1099s track financial transactions during a tax year, such as non-employee earnings, interest and dividends, rental income, and more. These transactions may be taxable events and have implications as you file your annual tax return.
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