What Is a 1099 Form? Reporting Your Income for Taxes

When you first receive a 1099, you may question why you are getting this form, what it is, and how you should report it on your tax return.

1099 forms are IRS “informational returns” which are provided to the IRS. The IRS then looks at their copy of the 1099 forms and then matches it to the information reported on the recipient’s tax return.

Examples of 1099 income might include earnings you made as an independent contractor or freelancer, rental income, gambling winnings, and more. In this guide, we’ll give you an overview of what 1099s are and how they’re used so you can be prepared if you receive one.

What is a 1099 form used for?

A 1099 tax form is used to document different types of payments, typically from someone that isn’t your employer, such as an individual, business, or entity, like the government. 

The different types of 1099 forms report various types of taxable and non-taxable income as well as why the form was issued. For example:

• Non-Employee Compensation
• Interest
• Dividends
• Retirement plan distribution

These are just some of the types of income that require a 1099 form.

So you‘ve received a 1099 form–or several–but what are you supposed to do with it?

First, 1099s are filled out by the payer to include the appropriate details. The payer is then responsible for sending copies to you and the IRS. As a taxpayer, if you receive a 1099 form, it’s your responsibility to report the income on your yearly tax return. 

How is Form 1099 different from a W-2?

With all the different tax forms out there, you might be wondering, “What is the difference between a 1099 vs. W-2 form?” and “How does a 1099 work?” 

While both a W-2 and a Form 1099  serve similar purposes, to report the income you received from sources throughout the tax year, each is issued under a different circumstance. Since that’s the case, each requires a slightly different planning approach for tax season:

• As an employee, you’ll receive a Form W-2.  You’ll get one W-2 from each employer. Your income, any tax you had withheld, as well as the FICA tax paid (Social Security) will be listed on your W-2.
• As an independent contractor or owner of your own business, you’ll receive Form 1099 from clients with reporting their payments made to you along with your tax identification number. There is a good chance you’ll receive multiple 1099 forms from multiple clients.
• As a self-employed person, you’re responsible for estimating your own tax liability (the amount of tax you will owe on your income)   and paying the self-employment tax (your FICA Tax, including Social Security )since taxes are not typically withheld by clients for independent contractors or small businesses.
• Even if you do not receive a 1099 or W-2, you are required to report all of your income on your tax return.

Types of 1099 Forms Explained

There are a lot of different types of 1099 forms. You may receive one or several different types of 1099, depending on how you received the income. 

The types of 1099 forms you may encounter during tax season are:

• Form 1099-NEC: Nonemployee compensation
• Form 1099-MISC: Miscellaneous Information
• Form 1099-K: Payment Card and Third-Party Network Transactions
• Form 1099-R: Distributions from Pensions, Retirement or Profit-Sharing Plans, Annuities,  IRAs, Insurance Contracts, etc.
• Form 1099-B: Proceeds from Broker and Barter Exchange Transactions
• Form 1099-INT: Interest Income
• Form 1099-DIV: Dividends and Distributions

 Let’s break down some of the most commonly used 1099 forms:

1099-NEC

You’ll receive a 1099-NEC if you work as an independent contractor or are self-employed during the previous tax year. This form is formally referred to by the IRS as the Form 1099-NEC, Nonemployee Compensation.

1099-MISC

A 1099-MISC form reports  payments including rent, royalties, awards and any other payments that do not fit on another specific 1099 and are above certain amounts. This could be for various reasons, such as side work or winning a contest. A 1099-MISC reports payments of at least $600 and includes rent, royalties, awards, and any other payments that do not fit on another specific 1099 form.  This would include items such as side work or proceeds from winning a contest.  This form is formally referred to as Form 1099-MISC, Miscellaneous Information by the IRS.

1099-K

Form 1099-K is a 1099 form used to report credit and debit card transitions along with third-party network payments, which are typically generated when someone pays using an app. The 1099-K is formally referred to as Form 1099-K, Payment Card and Third-Party Network Transactions by the IRS.

1099-R

Used to report the distribution of retirement benefits, the 1099-R includes:

• Pensions
• Annuities
• Other retirement plans 

This form is formally referred to by the IRS as Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

Additional variations of Form 1099-R include:

• Form CSA 1099R,
• Form CSF 1099R 
• Form RRB-1099-R.

How do you get your 1099 forms?

1099 forms report payments made between individuals, businesses, and organizations. Since many people have unique work situations these days, various 1099 forms can be received for a variety of reasons.

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.

If the yearly income for Non-Employee Compensation is below $600, the payer is not required to file a 1099-NEC, although the payer may still choose to do so.

When are 1099 forms issued?

If you’re waiting to receive your 1099 form, it is important to note that the different types of 1099s are issued on different due dates. For example, a 1099-NEC form, normally designed to report payments if you’re a freelancer or independent contractor, is due to you by January 31st. The exception being if January 31st isn’t on a business day, then the due date moves to the next available business day. 

Payers are required to send you these forms early in the tax season in order to allow you the time needed to prepare your tax return while providing the IRS with evidence of how much income you have received during the tax year. 

If you’re the Payer and  sending out 1099 forms, here are  important rules to note:

1. Most, but not all, 1099 forms are due to the recipient by January 31st. This applies whether they’re sent electronically or by mail.
2. If you’re mailing a paper form to the IRS, it’s important to have Form 1099-NEC filed and postmarked by January 31st and Form 1099-MISC filed and postmarked by February 28th.
3. If you’re using a tax software like TurboTax to send your forms to the IRS, the software will import the information needed to generate the forms for you. Form 1099-NEC needs to be e-filed by January 31st and Form 1099-MISC needs to be e-filed by March 31st.

The due dates for filing 1099 forms as a Payer does not change the due tax for filing your tax return.

What to do if you don’t get your 1099 form

In order to avoid possible penalties and a bill from the IRS for owed taxes, you need to report the income received from a 1099 on your yearly tax return. As a US Citizen, you’re responsible for paying the taxes you owe, even if you don’t receive a 1099 or the proper forms. 

If you’re expecting a 1099 and haven’t received all your 1099s by the January 31st or the February 15th deadlines, contact the business or individual responsible for sending you the 1099 form and request that they immediately send you a copy so you can file your tax return on time.

Addressing errors on your 1099

If you receive a 1099 form and notice an error on your 1099 form, it’s vital you reach out to the business, individual, or organization as soon as possible and ask them to correct the mistake. There may be some cases where the Payer may be able to correct the error before they send a copy of  the incorrect 1099 form to the IRS.

The Payer that  submitted the  incorrect 1099 form  to the IRS will need  to file a corrected 1099  through the same method as the original form was filed. Your copy will be sent to you  once the 1099 is correct and filed so you can use it to properly file your taxes.