How Does a 1099 Form Work?

by Victoria Lee Blackstone ; Updated March 15, 2018

A 1099 form is not one specific form; rather, it represents a series of forms, all of which begin with the number “1099.” The IRS calls the 1099 form series “information returns.” Any payer who disburses reportable monetary transactions, such as dividends, royalties or non-employee compensation, must provide the appropriate 1099 form to the IRS and to the payee.

Payers and Payees

You’re a “payer” if, for example, you own a business that pays a contractor to perform services. The contractor is not on your payroll as an employee, but she performs work for you as an independent contractor. If you pay her more than $600 during a tax year, you must document the amount you paid on a Form 1099-MISC (“Miscellaneous Income”), provide the IRS with a copy and send a copy to her. She becomes the recipient of the compensation, or the “payee.” Other types of 1099 forms report other types of payments.

Examples of 1099 Forms

The Form 1099 series covers a lot of territory. Form 1099-MISC is not only used to report payments to independent contractors, but it’s also used to report royalty payments, which carry a lower threshold requirement of $10 before a payer must issue the form to the IRS and the payee. Other 1099 forms are for different types of payees, including beneficiaries, plan participants and policy holders. If you receive income from dividend payments, you’ll receive Form 1099-DIV, and if you receive interest income, you’ll receive a Form 1099-INT. If you’re retired and you receive retirement income, such as from your 401(k) plan or from an Individual Retirement Arrangement (IRA), you’ll receive Form 1099-R.

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1099 Issuing Deadlines

If you are the payee of 1099 income, you’ll receive a 1099 form from the payer. The payer has IRS-imposed deadlines by which he must issue these forms. The deadlines by which a payer must submit a form to the IRS and issue the same form to a payee may be different. For example, a payer must submit Form 1099-INT to a payee by January 31, but the payer has until February 28 to submit the form to the IRS. A complete list of these deadlines is contained in the IRS publication “A Guide to Information Returns,” which you can download from IRS.gov.

How to Report 1099 Income on Your Tax Return

Each type of 1099 form has its own filing instructions, which the IRS publishes online at IRS.gov. Click the “Forms and Instructions” tab from this website, and type your specific Form 1099 into the IRS search block when the page loads. You’ll be taken to a menu of search results from which you can click on the specific information you need.

About the Author

Victoria Lee Blackstone is a horticulturist and a professional writer who has authored research-based scientific/technical papers, horticultural articles, and magazine and newspaper articles. After studying botany and microbiology at Clemson University, Blackstone was hired as a University of Georgia Master Gardener Coordinator. She is also a former mortgage acquisition specialist for Freddie Mac in Atlanta, GA.

Photo Credits

  • Tax filing gone wrong: this accountant has had enough. image by Alexey Stiop from Fotolia.com
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