Each January, your mailbox and e-mail is likely filled with tax forms.
If you work for an employer, you’ll receive a W-2 reporting your wages. But if you do any self-employed or freelance work, you may receive 1099 forms from each of your clients reporting the income they paid to you.
Anyone who received income from investments, retirement accounts, Social Security benefits, government payments — or those who took withdrawals from 529 college savings plans or health savings accounts — can expect to receive 1099 forms, too.
There are many different versions of the Form 1099 depending on the type of income you need to report when you file your return. Keep in mind that you’re not the only one who receives these forms — the IRS is getting copies, too.
Here’s everything you need to know about 1099s at tax time.
What Is a 1099 Form?
A 1099 is a tax document that reports income you receive from sources other than an employer.
You’ll get a 1099 if an organization or business paid you more than a certain amount during the year (generally $600) for freelance or self-employed work and you’ll also get 1099s from your financial institutions reporting dividends, interest and capital gains.
The Social Security Administration sends a 1099 reporting the benefits you received during the year. And you’ll receive 1099s reporting withdrawals from 529 college-savings plans, HSAs and retirement savings plans.
Businesses and financial institutions generally must send 1099s by January 31, although the deadline is mid-February for a few of the forms.
There Are Many Types of 1099s
There are more than a dozen different varieties of 1099 forms, and the reporting requirements for each is different. Money reported on a 1099 form is generally taxable, but not always — for example, you’ll receive a 1099 reporting withdrawals from 529s and HSAs but the money may not be taxable if you used it for eligible expenses.
On the other hand, you may receive taxable income that isn’t reported on 1099 forms. For example, self-employed people need to keep track of their incomes themselves, especially if they’re providing services to individuals rather than to businesses because they’re not going to receive 1099s for those payments.
“Sole proprietors need to keep their own records because they aren’t necessarily going to get a 1099-NEC,” Annette Nellen, professor and director of the graduate tax program at San Jose State University, says.
“Anybody who is providing services to nonbusinesses needs to keep the records, because they’re not going to get 1099-NECs for those amounts if, for example, they’re a construction or landscaping business and they’re receiving payments from individuals,” she adds.
Why Did I Get a 1099 Form?
You’ll receive a Form 1099 if you earned money from a nonemployer source. Here are some common types of 1099 forms:
— 1099-B reports income you received from the sale of stocks, mutual funds, ETFs and other types of financial transactions, plus the sale date and other information.
— 1099-C reports debt of $600 or more that a financial institution or lender canceled or forgave. Canceled debt is often taxable.
— 1099-DIV reports income you received through dividends and other stock distributions (generally $10 or more).
— 1099-G reports money you received from the government, such as state and local tax refunds and unemployment compensation.
— 1099-INT reports interest income typically of $10 or more from your bank, credit union or other financial institution. The form reports the interest income you received, any federal income taxes withheld, tax-exempt interest and other information.
— 1099-LTC reports long-term care insurance benefits you received. These aren’t usually taxable if they were paid from a tax-qualified long-term care insurance contract (the insurer may check the “qualified contract” box on the form if it is tax qualified). Contact your long-term care insurance company for more information.
— 1099-MISC reports several types of miscellaneous payments — for example, if you earned $600 or more in prizes and awards — plus other types of income.
— 1099-NEC reports freelance or consulting work earnings. NEC stands for nonemployee compensation. Prior to 2020, this income was generally reported on Form 1099-MISC.
— 1099-OID reports money you received from certain types of bonds. OID stands for original issue discount.
— 1099-Q reports withdrawals from qualified education programs, such 529 college-savings plans and Coverdell education savings accounts. The form reports your gross distributions and earnings separately. You won’t pay taxes on them if you used them for qualified education expenses.
— 1099-R reports distributions from retirement savings accounts, pensions, annuities, profit-sharing plans and life insurance contracts. It shows whether any taxes were withheld from the distribution and provides more information about the withdrawal.
— 1099-S reports proceeds from selling a house. The amount may not be taxable — for example, if you’re single you can generally exclude up to $250,000 in home sale profits from taxes, or up to $500,000 if married filing jointly if you lived in the house for two of the past five years. This form comes in your closing paperwork rather than in January.
— 1099-SA reports withdrawals from your HSA. You generally need to report the distribution on Form 8889 when you file your tax return but distributions for qualified medical expenses are not taxable.
— SSA-1099 reports the Social Security benefits you received for the year.
— 1099-K reports payments you received from third-party processors — like Venmo or PayPal — for sales of goods or services.
New Rules for Form 1099-K
For the 2022 tax year, third-party processors needed to send you a 1099-K only if you conducted more than 200 transactions equaling at least $20,000 in gross payments.
But many more will receive this form for the 2023 tax year because the IRS significantly reduced the threshold for sending one: Anyone who sells goods or services and receives $600 or more in funds processed by a third-party processor should receive Form 1099-K.
The new rules were originally scheduled to take effect in 2022, under the American Rescue Plan Act. But on Dec. 23, 2022, the IRS announced that it would delay the requirement for a year.
“It’s a transitional year for 2022. Taxpayers don’t have to use the new threshold — they can use the old one,” Nellen says. “But this should be going into effect for 2023 transactions.”
New 1099-K reporting requirements shouldn’t affect your tax liability, though. You’ll still have to report taxable income you received from goods or services, even if you don’t receive the form.
See the IRS updated 1099-K factsheet for more information about the current rules and what to report on your tax return.
Where Can I Get a 1099 Form?
You should receive your Form 1099(s) in the mail or electronically, or you may be able to access them in your financial institution account.
If you haven’t received a one by mid-February or think it may be lost, contact the company or organization that should have sent it. Check your tax return from last year to see which companies, banks, brokerages and others sent you form 1099s — and also think about any new types of income you received during the year.
“Look at your return from last year, determine what’s missing and/or what would be new for this year,” Nellen says. And she says that if you move, make sure the issuer has a forwarding address to send your 1099 so it doesn’t get lost in the mail.
It’s a good idea to review these forms as soon as you receive them and contact the issuer right away if there are any mistakes.
“If it’s wrong, taxpayers should contact the business and have the business reissue a corrected one,” Nellen says.
They’ll need to send corrected versions to you and to the IRS so your tax return doesn’t get held up.
[Read: When You Should (and Shouldn’t) Worry if Your Tax Refund Is Delayed.]
Where Do I Report the Information on a 1099 Form?
There are instructions on the back of the forms with information regarding why you received them, what each box on them reports and what you should do with the information. You can also look up more information about each form at IRS.gov.
For example, if you’re self-employed, you generally report your income from 1099-NEC on Schedule C, Profit or Loss from Business. You typically report information you receive in 1099-B reporting capital gains from sales of stocks, mutual funds or ETFs on Schedule D, Capital Gains and Losses.
[READ:How to File Taxes When You Are Self-Employed]
“There’s a variety of reasons why you might get a form, and 90% of the time you get a form it’s taxable,” Nellen says.
Some 1099 Money Isn’t Taxable
There are some situations in which money reported in a 1099 form is not taxable, and you need to be careful when you put the numbers in your return. Some tax forms have worksheets to reconcile differences.
For example, you may receive 1099-SA reporting HSA distributions but if you made withdrawals for qualified medical expenses they’re not taxable. You must report the total HSA distributions you received for the year on IRS Form 8889 and the nontaxable amount you used for qualified medical expenses. Keep records of those qualified expenses in your tax files.
Similarly, you’ll receive Form 1099-Q for distributions from 529 plans, but money you used for qualified education expenses aren’t taxable.
“You don’t have to report it, but you need to keep the records to show that it was received and used for qualifying expenses,” Mary Kay Foss, certified public accountant in Walnut Creek, California, says.
What if I Ignore the 1099 Form?
If you don’t report taxable income from a 1099, you’ll probably hear from the IRS. Its automated computer system compares income you report on your return with payers’ information.
“The most common trigger for an audit is missing information that’s been reported to the IRS via an information return, such as a 1099,” Chelsea Monk, enrolled agent and assistant client manager at Hamilton Tax and Accounting in Grayslake, Illinois, says.
[READ: What Really Happens During an IRS Tax Audit]
If the IRS receives a 1099 with income you didn’t report, it may send you a CP2000 notice explaining how the numbers on your return differ from those third parties reported. The IRS may also propose changes to your income, tax, credit or payments with the notice.
If you agree, sign the response form and send it in with any money you owe. If you don’t agree, complete the form and provide a signed statement explaining why — and send documents supporting your statement. For more information, see the IRS Tax Return Reviews by Mail publication.
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What Is a 1099 Form and What Should I Do With It? originally appeared on usnews.com
Update 03/29/23: This story was published at an earlier date and has been updated with new information.
