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? ›
A 1099-NEC for Non-Employee Compensation payments and generates Self-Employment income. As an independent contractor or freelancer, for example, you may receive a 1099-NEC form documenting payments made to you throughout the year from a specific paying client, individual, or business.
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 does a 1099 mean? ›
A 1099 form shows non-employment income, such as income earned by freelancers and independent contractors. On the other hand, a W-2 shows the annual wages or employment income that a taxpayer earned from a particular employer during the tax year.
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 is the difference between a 1099 and a 1099 consolidated tax form? ›
A 1099 consolidated tax statement combines multiple 1099 forms—1099-INT, 1099-DIV, 1099-OID, 1099-B, and/or 1099-MISC—into a single, multi-page document. Some consolidated statements include all 5 forms, while others only include the 1099s the IRS requires for that client.
How many different 1099s are there? ›
All 1099 tax forms must be postmarked by Jan. 31. Here's a rundown of which ones you might encounter.
What is the 1099 A form? ›
If the lender acquires the secured property, or has reason to know that you abandoned the secured property, the lender should send you a Form 1099-A, Acquisition or Abandonment of Secured Property.
How much can you make on a 1099 before you have to claim it? ›
How does an independent contractor pay taxes? If you earned $600 or more during the year (regardless of whether you received 1099s for that work), you'll need to file an income tax return when tax time rolls around.
Who Doesn't Need to Receive a Form 1099-MISC or 1099-NEC? Generally, C corporations, S Corporations, and LLCs formed as corporations or S Corps don't need to receive a 1099-NEC or 1099-MISC. On irs.gov, check the 1099-NEC instructions and 1099-MISC instructions for exceptions when you are required to issue a 1099.
What is a 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.
What is the difference 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.
Do I have to pay taxes on a 1099s? ›
1099-DIV: Dividend income
A dividend is an amount paid by a company based on your ownership of stock. You received a 1099-DIV to let you know how much dividend income you received in the last calendar year. California does not have a lower rate for qualified dividends. All dividends are taxed as ordinary income.
Does a 1099 make you pay taxes? ›
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.
Is being a 1099 good or bad? ›
1099: Being a 1099 employee offers more flexibility and control over your work, the possibility of higher earnings, and potential tax deductions for business expenses. However, you'll be responsible for managing your own taxes, won't have access to employee benefits, and may experience income volatility.
What's the difference between a 1099 and a W-2? ›
A W-2 is a separate form from a 1099, the primary difference being that the W-2 is issued to employees on the company payroll, whereas a 1099 is given to independent contractors and other non-payroll workers.
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.
What happens if I don't have a 1099 TurboTax? ›
As you didn't receive a form 1099-NEC, report it as Other self-employed income. You report the income you received in cash, checks or bank transfers or without a 1099-NEC as self-employed income under Other self-employed income. Click Continue to enter your income received in cash, checks or bank transfers.
What are the rules for 1099? ›
The 2023 IRS 1099 rules for Form 1099-MISC (for 2024 filings) require business payers to report payments of $600 or more for specified types of income and other payments, at least $10 in royalty payments, backup withholding of income taxes, and if your business made direct sales of at least $5,000 of consumer products ...
