While payroll employees of a company receive a W-2 form, anyone who works for themselves on a regular basis typically receives a 1099 tax form — and if they work for several entities, they may receive a lot of 1099s. But even people who aren’t independent contractors may receive 1099s for a variety of reasons, such as reporting prize winnings, investments and retirement distributions to the Internal Revenue Service.
If you’re using a 1099 to file your taxes, here’s everything you need to know, including answers to these common questions:
— What is a 1099 form?
— Why did I get a 1099 form?
— What are common types of 1099 forms?
— Where can I get a 1099 form?
— Where do I report the information included on a 1099 form?
— What if I ignore the 1099 form?
[SEE: Every Tax Deadline You Need to Know.]
What Is a 1099 Form?
A 1099 form is tax document, and any organization or business that paid you — generally over $600, but there are exceptions — during the tax year is supposed to send one to you. The deadline for businesses to send 1099s is the same for employers to send W-2s: Jan. 31.
“IRS Form 1099 is a versatile vehicle for reporting all kinds of income that is earned, unearned and imputed. There are 21 variants of the 1099 that are applied to a wide range of situations,” says Robert Burnette, CEO, financial advisor and tax preparer at Outlook Financial Center in Troy, Ohio.
And even if you’re not supposed to get a 1099 form because you didn’t hit that $600 threshold, you still might, according to Beth Logan, an enrolled agent and owner of Kozlog Tax Advisors in Chelmsford, Massachusetts.
“While the filing requirements have income limits, there are many companies that provide the 1099 regardless of the amount of income. It is just easier for the system to process all the forms with all the payments than to sort through them,” she says.
Why Did I Get a 1099 Form?
You received a 1099 form because you earned money in some way from a non-employer source. For example, you may have earned money as a freelance writer for a magazine, a shopper for a company like Shipt or a driver for a company like Lyft or Uber.
Or you might get a 1099 because you earned money from investments.
As Burnette says, there are 21 types of 1099 tax forms.
What Are Common Types of 1099 Forms?
Here are descriptions of some types of 1099 forms that you may run into:
— 1099-NEC. The 1099-NEC didn’t exist before 2020. If you are the sole proprietor of your own business or if you’re an LLC and you do work for clients, you’ll receive a Form 1099-NEC. NEC stands for nonemployee compensation. The revenue now reported on a 1099-NEC was previously reported on a 1099-MISC.
— 1099-MISC. Yes, the 1099-MISC still exists. The “MISC,” short for “miscellaneous,” may arrive in your mailbox if you earned $600 or more in rent, a prize on a game show, royalties from a song you wrote or money an attorney sent you.
— 1099-B. This form will include any income you received from the sale of stocks, mutual funds, ETFs and other types of transactions.
— 1099-C. The C stands for “cancellation of debt.” “This is issued by a financial institution or a lender to report a debt of $600 or more that was cancelled or forgiven. The amount cancelled or forgiven is imputed as income and is taxable in many circumstances,” Burnette says.
— 1099-DIV. This form shows income received through dividends and other stock distributions totaling $10 or more.
— 1099-INT. If you earned taxable interest income of $10 or more from your bank, credit union, brokerage or other financial institution, you will receive a 1099-INT.
— 1099-R. Some retired people receive 1099-Rs, which show distributions from income sources such as pensions, annuities, profit-sharing plans, life insurance contracts and other retirement accounts.
— SSA-1099. The Social Security Administration sends SSA-1099s every year to American citizens and residents who received Social Security benefits during the previous year.
— 1099-G. The “G” is a reference for government. “This is where you will normally see state and local tax refunds as well as unemployment compensation,” Burnette says.
— 1099-K. This shows revenue received through a third-party processor like a credit card company. “Businesses or hobbyists that receive credit card payments may get these,” Logan says.
— 1099-S. If you sold a house or other real estate last year, you may receive a 1099-S. You may not have to pay tax on it, but you’ll need to report the numbers on your tax return. “It’s often hidden in the mound of paperwork when you sell a home, so look through it,” Logan says. That’s right; the 1099-S generally won’t come in the mail but will be in your closing documents.
— 1099-Q. This form will show any 529 payments that you may have received last year.
— 1099-LTC. If you received any long-term care insurance benefits in the last year, you may get a Form 1099-LTC.
— 1099-SA. Did you receive any distributions from your health savings account? You might receive a 1099-SA. You may not have to pay taxes on the distributions, but you’ll still sometimes receive a tax form.
— 1099-OID. Think bonds, like savings bonds or corporate bonds. This tax form “shows information similar to interest but usually on bonds,” Logan says.
[READ: Tax Prep Checklist: Collect These Forms Before Filing Your Taxes.]
Where Can I Get a 1099 Form?
You’ll receive a 1099 form either through the mail or electronically from the organization that sent you the funds, such as a company that employed you, a bank or a brokerage.
If you haven’t received a 1099 or you think it may have been lost, you can contact the company or organization that should have sent it.
Where Do I Report the Information Included on a 1099 Form?
It varies. As noted, there are 21 different 1099 forms, and it depends on the type of income received.
If you’re an independent contractor, for example, “for earned income, the 1099-NEC and 1099-MISC are the most common and are reported on Schedule C,” Burnette says.
[See: Red Flags That Could Trigger a Tax Audit.]
What if I Ignore the 1099 Form?
Your world probably won’t collapse, but it could make the tax filing experience a lot more annoying.
You’ll receive 1099s from a company or organization, but so does the IRS.
“If a Form 1099 of any kind is issued to a taxpayer, the IRS automatically gets a copy,” Burnette says. “If the 1099 is not reported with a taxpayer’s return, the IRS document matching algorithm will catch it and a notice to the taxpayer will be sent.”
“Depending on the 1099 which is missed and when it was sent to the IRS, your tax refund, if you get one, will be delayed and your tax return will be pulled aside,” Logan says, adding: “Sometimes the return is processed and the missed 1099 is discovered later.”
If that happens, Logan says that the IRS will probably send you a letter, often a CP2000, stating that you missed income.
“If you agree, then you don’t need to do anything. You will either get the adjusted refund in about two months, or you will get a bill for what you owe,” Logan says.
If you disagree that you owe extra money, she advises hiring an enrolled agent or a certified public accountant to respond to the IRS.
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Every Tax Deadline You Need to Know
What Is a 1099 and Who Gets One? originally appeared on usnews.com
Update 01/28/22: This story was published at an earlier date and has been updated with new information.
