A 1099 is a form that details the income that one received outside of any salary that was paid by an employer. In this guide, we will discuss what 1099 forms are, how they work, and what you as the receiver of one should should do.
A 1099 is what is referred is used for information purposes. It reports certain information about income that you received that is needed for filing your taxes. There are different types of 1099 forms that are used to report different sources of income. Below we cover the different types of 1099 forms, and what they are used to report.
There are a number of different types of 1099 forms, each created to report a different type of income that you’ve received. Some common types of 1099 forms include:
If you’re a freelancer or independent contractor, you’ll probably start hearing a lot about Form 1099-NEC (Nonemployee Compensation). This form details how much you received for services you performed for someone who isn’t your employer.
If you received interest income of at least $10 during the year, you’ll be issued a 1099-INT to report that income. For example, if your bank pays you $10 in interest, they’ll send you a 1099-INT at the end of the year so you can report that income on your tax return.
The 1099-DIV is used to report dividend income, from a stock or mutual fund. Similar to the 1099-INT, you’ll receive this for dividend distributions of $10 or more.
If you received any government payments, like unemployment benefits, you’ll receive Form 1099-G. That form will include any money that you received as well as any
Previously, any income that you received from freelancing was included on a 1099-MISC. Starting in 2020, that income is recorded on your 1099-NEC. But the 1099-MISC still includes a lot of other important income information. If you received miscellaneous income, like rent award winnings, or legal settlements, that will be included on a 1099-MISC.
If anyone pays you via credit card or a third party payment processor (like Paypal), you might receive a 1099-K. But there’s a pretty high limit for this form to be issued. You’ll only receive it if you were paid more than $20,000 or you received more than 200 payments.
The 1099-R form is for distributions you received from retirement plans, pensions, IRAs, annuities, and profit-sharing programs (as well as a few other related things). Loans from a retirement plan may also qualify you to receive a 1099-R.
While there are a number of different 1099 forms, they all contain the same basic information for you to use while filing your tax return.
On each 1099 form you’ll find:
A copy of the 1099 form is mailed to you and another copy is mailed to the IRS to let the IRS know that you were paid that income.
A 1099 form reports income that you’ve received, and that income then needs to be included on your tax return. For example, if you performed web design work for a client and they paid you $2,500, they’ll also send you Form 1099-NEC reporting that amount.
You’ll then need to make sure that you’ve included that income on your tax return for the year, as you’ll need to pay income tax on it.
If you receive income from a client, a bank, the government, or anywhere else, you will likely receive a 1099 to report that income. In specific instances, you may not meet the minimum payment amount to receive a 1099. For example, if a client pays you less than $600 for the year, you won’t receive a 1099-NEC reporting that income.
Even if they don’t send you a 1099, it’s still your responsibility to make sure that income is included on your tax return.
But what if you don’t receive a 1099 when you should have? You’re still responsible for reporting any and all income that you receive, even if the payer fails to send you a 1099.
If you haven’t received your 1099 by the due date, contact the payer and ask them to re-send you a copy of your 1099. If you still aren’t able to track down a copy of your 1099 after asking for it, that’s not a free pass to then not include that income on your tax return. You have other ways of figuring out how much you were paid, by using your bookkeeping system or bank statements to track down payments. It’s more work on you, but including that income on your tax return is required, whether or not you received a 1099.
If you run a business, there is one form that you may need to send to anyone who has done work for you: a 1099-NEC.
You’re required to send a 1099-NEC if:
If your business did hire a contractor to perform work and paid them $600 or more (not using a payment processor), you will need to send them a 1099-NEC.
Step 1: Request form W-9
For each independent contractor, request a W-9. This will include the important information you need in order to file a 1099-NEC, like their name, address, taxpayer identification number, and entity type. If you work with Taxfyle, they can send any 1099-NECs that are required once you provide them with the W-9’s for each independent contractor.
Step 2: Submit Copy A to the IRS
There are two ways to file with the IRS. The first way is to obtain a paper copy of the 1099-NEC and file. You’ll need to order a copy of the form from the IRS and they will mail it to you along with instructions.
If you prefer to file a copy online, you’ll do so through the IRS’s FIRE system (Filing Information Returns Electronically).
Step 3: Submit Copy B to the independent contractor
You’ll then mail Copy B to the independent contractor. You can provide them a copy of the form electronically, but first, you’ll need to obtain their consent to receiving the form that way.
You’ll need to submit both copies of the 1099-NEC by January 31. Be careful with this deadline — if you miss it you could be subject to penalties.
If you’re not sure about the steps required or you don’t know if you can get the forms filed by the deadline, Taxfyle can help.
There are a lot of tax forms and due dates to keep track of, whether you’re receiving or sending 1099’s (or both). Millennial Financial Service is here to make it easier for you and can help you file any 1099’s that you need to send and help you complete a tax return that includes any 1099 income that you received.
