Each January, your mailbox and email are likely filled with tax forms.
You’ll receive a W-2 reporting your wages if you work for an employer. But if you do any self-employed or freelance work, you may receive 1099 forms from each of your business clients.
Anyone who received income from investments, retirement accounts, Social Security benefits or government payments — or those who took withdrawals from 529 college savings plans or health savings accounts — can also expect to receive 1099 forms.
There are many different versions for the many different types of income you can earn.
But what should you know about them? Here’s a quick guide to help you prepare for the upcoming tax season.
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 one if an organization or business paid you more than a certain amount during the year (generally $600 or more) for freelance or self-employed work and from financial institutions reporting dividends, interest and capital gains.
The Social Security Administration also sends a 1099 reporting the government benefits you received during the year. 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 Jan. 31, although the deadline is mid-February for a few of the forms. And keep in mind that you’re not the only one who receives these forms — the IRS is getting copies, too.
There Are Many Types of 1099s
There are more than a dozen varieties of the 1099, and the reporting requirements for each differ. 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 use 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 income, especially if they provide services to individuals rather than businesses.
“Sole proprietors need to keep their own records because they aren’t necessarily going to get a 1099-NEC,” says Annette Nellen, professor and director of the San Jose State University graduate tax program.
“Anybody who is providing services to non-businesses 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 non-employer source. Here are some common types of 1099 forms:
— 1099-B reports the income you received from the sale of stocks, mutual funds, ETFs and other types of financial transactions, plus the sale date and other information. These profits are subject to the capital gains tax.
— 1099-C reports $600 or more in debt 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 earnings of at least $600. 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 as 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 used 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 and 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 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 if they total $5,000 or more for tax year 2024.
New Rules for Form 1099-K
For the 2023 tax year, third-party payment processors only needed to send out 1099-Ks if account holders conducted more than 200 transactions totaling at least $20,000 in gross payments.
However, in 2024, you’ll receive a 1099-K if your business transactions total just $5,000 (personal payments, like gifts and reimbursements to family or friends, are not counted).
New rules that would reduce the threshold to $600 were originally scheduled to take effect in 2022. However, the IRS delayed that requirement in Dec. 2022 and again in Nov. 2023. The IRS is now planning to phase-in the requirement with the $5,000 threshold for the 2024 tax year, $2,500 in 2025 and $600 in 2026 and after.
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.
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 online through an account with your financial institution.
If you haven’t received the 1099 form you need by mid-February, you should contact the company or organization that should’ve sent it. If you’re unsure if you received all the forms you need, you can check your tax return from last year for clues.
“Look at your return from last year, determine what’s missing and/or what would be new for this year,” Nellen says. If you move, make sure the issuer has a forwarding address to send your 1099 so it doesn’t get lost in the mail, she adds
It’s a good idea to review these forms as soon as you receive them and contact the issuer immediately 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 the IRS so your tax return isn’t held up in processing.
[Read: When You Should (and Shouldn’t) Worry if Your Tax Refund Is Delayed.]
Where Do I Report the Information on a 1099 Form?
The place where you report the information depends on the type of 1099 form you received and the type of return you’re filing.
For example, if you’re self-employed, you generally report your income from 1099-NEC on Schedule C, Profit or Loss from Business. Further, you typically report information you receive on a 1099-B — which reports capital gains from sales of stocks, mutual funds or ETFs — on Schedule D, Capital Gains and Losses.
If you’re not sure where to report income, look to the instructions resource for the form you received, which can be found at IRS.gov.
“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.
[READ: How to File Taxes When You’re Self-Employed]
Some 1099 Money Isn’t Taxable
There are some situations in which money reported on a 1099 form is not taxable, so you’ll 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 they won’t be taxable if you spent the withdrawals on qualified medical expenses.
Similarly, you’ll receive Form 1099-Q for distributions from 529 plans, but the money you used for qualified education expenses isn’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,” says Mary Kay Foss, a CPA in Carlsbad, California.
What if I Ignore the 1099 Form?
You’ll probably hear from the IRS if you don’t report taxable income from a 1099 form. Its automated computer system compares the income you report on your return with the copy of the 1099 form it received.
“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, an enrolled agent and client manager at Hamilton Tax and Accounting in Miles, Texas, 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 notice explaining how the numbers on your return differ from those that third parties reported. The IRS may also propose changes to your income, credits 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 You Do With It? originally appeared on usnews.com
Update 03/21/25: This story was published at an earlier date and has been updated with new information.
