How Does a 1099 Form Work?

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Should you expect a 1099 this year? A 1099 form enables the IRS to catch income from sources other than traditional employment wages. For some taxpayers, this can be things like investments from dividends, certain government payments, taxable distributions from cooperatives, cancellation of debt and more.

In total, the IRS provides around 17 different 1099 forms. What can make 1099 forms confusing for some people is that they apply to many different forms of income.

What Is a 1099 Form?

The IRS considers a 1099 form to be an "information return" that creates a paper trail for income sources. Relying on the fact that the person or entity that paid you will report the income, the IRS uses an automated system that checks totals paid against what recipients have claimed. While there are many 1099 forms available, most taxpayers will only encounter a smaller sample of them around tax time. Here are some of the most common 1099 forms people deal with:

  1. 1099-NEC: Applies to income of more than ​$600​ earned as an independent contractor.
  2. 1099-MISC: Applies to other miscellaneous income like rents, prizes and healthcare payments.
  3. 1099-INT: Applies for interest payments of ​$10​ or more paid out by banks.
  4. 1099-DIV: Applies for payments of ​$10​ or more in distributions related to stocks or securities.
  5. 1099-B: Applies for stock sales.
  6. 1099-G: Applies for unemployment compensation, tax refunds and taxable grants.
  7. 1099-R: Applies for proceeds from real estate transactions.
  8. 1099-SA: Applies for distributions from an HSA, Medicare Advantage MSA or similar.

If a 1099 form from a specific payer arrives after you've already filed your taxes, you can use the 1040X (Amended U.S. Individual Income Tax Return). While this used to be a paper-filing option only, the IRS introduced an e-filing option in 2020.

Earnings Thresholds for 1099 Forms

The threshold for receiving a 1099 form is ​$600​ in earned income. It's not necessary for the payer to send you a 1099-MISC if you earn less than that in a year. However, you must still report that income on your taxes as self-employment income. In the case of any dividends or distributions, even a total as low as ​$10​ will trigger the generation of a 1099 form that must be filed by the recipient.

Overall, anyone who earns additional income from a source other than traditional employment shouldn't assume that they've done their due diligence just because they've filled a W-2 form that is also considered an "information return" by the IRS. If you work for multiple clients doing what can be considered side or contract jobs, you may receive multiple 1099 forms. All of them must be completed!

What's New for 2021

The big change for 1099 filings in 2021 is that IRS has brought back the 1099-NEC for the first time since the 1980s. For some filers, this will replace the 1099-MISC form that has been the default for reporting non-employee compensation. The deadlines for filing the 1099-MISC are ​March 1​ (paper) and ​March 31​ (electronic).

The newly reintroduced 1099-NEC form is only for reporting payments to independent contractors. However, both the new form and the existing 1099-MISC may be necessary if reporting both compensation and items like healthcare payments or royalties.

Due Dates for 1099 Forms

Tax day 2021 is on Thursday, April 15. The IRS has set the 2021 deadline for furnishing 1099-MISC and several other 1099 forms at February 15, 2021. Don't forget that various 1099 forms require specific reporting dates that fall in March. Most forms can be filed online to give you a longer deadline for filing than the paper deadline.