The Internal Revenue Service (IRS) receives information about many types of financial transactions on forms that are called information returns. A form 1099 of any type is an information return reporting income that you have been paid. If you receive a form 1099, the sender has also filed a copy with the IRS, and the federal agency will be watching for you to claim that income somewhere on your tax return.
A form 1099-MISC reports that you received money that is considered miscellaneous income. This form is often issued by businesses that use independent contractors to perform duties for them, but it has other uses as well. If a company pays more than $600 to one person for providing services as an independent contractor, the company must report the total paid on a form 1099-MISC. As a contractor, you report this money on Schedule C of your federal income tax return. This form is also used for reporting prize winnings of more than $600 that are taxable.
Regular employees do not receive 1099-MISC forms, because people employed by others are treated differently by tax law. The IRS has guidelines concerning who is considered an independent contractor. Generally, if the company controls the hours of work, and the person performing the work does not have have control over the business aspects of the job, that person is considered an employee, and the company must pay the correct payroll taxes on that employee. If you do not know whether you should be considered an independent contractor or an employee, you can file a form SS-8 with the IRS, and the agency will make the determination.
If you have settled a debt for less money than you owe, you will probably receive a form 1099-C. A form 1099-C is used to report any canceled or forgiven debt. This is considered taxable income and must be reported to the IRS so you can pay the appropriate taxes. Some exceptions to this law do exist, such as with some short sales of primary residences and if you as the debtor are insolvent. Enter the amount shown on the 1099-C form on IRS form 982 when filing your taxes.
1099-INT and 1099-DIV
1099-INT and 1099-DIV forms are used by banks and companies to report either interest income or dividend payments. In most cases, if a bank pays you more than $10 per year in interest, it must report that interest on a 1099-INT. You will report this on Schedule B and carry the amount over to your federal form 1040. A company must send form 1099-DIV if it pays you more than $10 in dividends or capital gains distributions, such as what you would receive from stocks or a mutual fund. This amount is also reported on Schedule B and carried to your form 1040, where you will calculate the correct tax due.