What Exactly Is the 1099 Form, and How Do You Fill It Out?

What Exactly Is the 1099 Form, and How Do You Fill It Out?
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Point Editorial

Tax forms are complicated. Some of the paperwork is standard and mandatory for all taxpayers to complete, while other subsections are for specific circumstances. One such subsection is Form 1099. 

Taxpayers use the 1099 form – technically known as Form 1099 – to record their income outside of work wages. The IRS refers to these individuals as non-employees. Non-employment income can come in many forms, and multiple types of 1099 forms exist to account for this. They are extremely helpful when it comes to calculating your total income for any given year.  

Not all non-employment income is taxable, but some amounts are. Either way, the IRS must know about it. Your Social Security number is included on all your 1099 forms, so while your income may be free of tax, you are still required to file the proper paperwork. If you don’t, the IRS can issue penalties and take further legal action, too. 

The deadline to mail Form 1099 is January 31. Again, if the income is taxable, you are responsible for paying the appropriate taxes whether you receive the form or not. 

To learn more about Form 1099, read on as we discuss the topic further in detail.

Types of 1099 forms

In total, the IRS uses 20 different 1099 form variations. The most common types include, but are not limited to: 

Form 1099-B: This applies to brokerage exchanges and bartering as well as stocks and commodities. Form 1099-B serves to record a breakdown of each investment, purchase and sale price, and additional gains or losses.

Form 1099-DIV: This form is for those who acquired income through dividends, meaning income made in the form of cash payments from selling stocks or shares in a company.  

Form 1099-INT: The IRS requires individuals who earned more than $10 in interest in any given tax period to fill out this form. Banks and investment firms usually send out INT forms.  

Form 1099-R: The 1099-R form applies to those who received money from a pension or a retirement plan. Note: this only applies to some retirement plans, not all. For more information, consulting a finance expert is an excellent place to start. 

Form 1099-MISC: This version mainly concerns those who earned money from miscellaneous sources like prizes, awards, or health care payments. Individuals must have made $10 or more to qualify. 

Form 1099-NEC: Businesses must distribute this 1099 form to anyone they paid $600 or more but are not considered official employees. Independent contractors fall into this category, as do self-employed freelancers. 

Before 2020, the IRS required freelancers and independent contractors to fill out the 1099-MISC form, but they have since changed it to the NEC. 

Who sends a 1099 form? 

Again, businesses send 1099 forms to non-employees who earn an annual income of more than $600. Even if you do not receive the form for whatever reason, you are still responsible for paying taxes on that income, if applicable. 

Failure to file your 1099 can result in a fine of $350 or more. 

It is the responsibility of the business or the client for which the non-employee is working to file the 1099 before the January 31 deadline. 

How to file a 1099 form

Step 1: Gather the necessary information. That includes the independent worker’s name, address, Social Security number, and how much money they received during the given tax year. 

Step 2: Submit a copy to the IRS. 

Also called Copy A, this is the copy of the 1099 form that the business must send to the IRS by the end of January. There is also a Copy B of the 1099 that the non-employee must complete and file by January 31. 

Depending on the state you live in, you may also be required to submit a Form 1099 to your state government.

FAQs

Do I need a Form 1099 to file my taxes? 

Taxpayers themselves do not need to send a 1099 form to the IRS as part of the tax filing process. Again, the business with which they are associated does this instead. 

However, the IRS still requires you both to report and pay taxes on this income, if necessary.

What does a 1099 employee mean?

Simply put, a 1099 employee, or a non-employee, is an individual who earns money from someone other than their official employer. 

What’s the difference between a 1099 and a W2?

1099 forms record non-employment income. A W2 form records annual wages and tips earned from official employment or your everyday job. 

The taxes on the income earned from freelancing work, for example, are not withheld from 1099 workers. That means workers themselves are responsible for deducting taxes from their pay. In comparison, W2 forms show employees the amount of taxes deducted from their salary, which is usually standard procedure.

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