Do I Have to Report a 1099?

The 1099 series of forms serves as information returns that provide the IRS with earned-income totals not reported on W-2 forms. The 1099-MISC, used to report over $600 in payments issued to a single taxpayer within a filing year, is the most widely recognized information return. When you receive a 1099, the IRS receives a duplicate copy of the same form, but you must still report the information you receive to meet your income tax obligations.

1099 Basics

Each 1099 form throughout the 1099 series is submitted to a recipient, you the taxpayer, and the IRS. In effect, the actual reporting of the 1099 to the IRS is done for you. What you must report to the IRS at the end of the tax year is the income earned on the 1099 and any tax withheld and reported on the forms.

1099 Forms

The 1099 range of forms includes the 1099-C for Cancellation of Debt, the 1099-B for Broker and Barter Exchange Transactions, the 1099-MISC for Miscellaneous Income and several additional forms that report income earned through interest, distributions, government payments such as unemployment and numerous other methods. The income earned and reported to you on a 1099 is subject to income tax and, potentially, self-employment tax.

1099-MISC

The 1099-MISC form is often referred to as Form 1099 without the identifying "MISC" designation because of its wide use. The 1099-MISC reports funds earned or paid in excess of $600, with the exception of royalty payments which must be reported when they are in excess of $10. Rents, contract work, prize winnings, fishing boat proceeds, medical payments and proceeds paid to attorneys are reported on the form. If any federal income tax is withheld from your earnings, your payer reports it in Box 4 of the form.

Taxes on 1099-MISC Income

The funds earned on a 1099-MISC must be reported to the IRS as income. You must pay both traditional income tax and self-employment tax on 1099-MISC earnings. However, you may not have to pay tax on the full gross amount earned. If your contract work or other earnings required you to spend money on business-related expenses, use Schedule C of Form 1040, Profit or Loss from Business, to deduct these expenses from your earnings.

Transferring the 1099 Information to Form 1040

All income reported to you on a 1099 series form has a corresponding line within the income section on IRS Form 1040, U.S. Individual Income Tax Return. The 1099-MISC income offset through the filing of a Schedule C is reported as business income (or loss). Taxable interest earnings, rental income and unemployment compensation each have dedicated reporting lines, while miscellaneous earnings such as prize winnings or debt cancellations must be reported as "other income." You must identify the type of other income and the amount. If any income tax was withheld on any 1099 series form you received, report the tax withheld under the "Payments" section of Form 1040 to reduce your total tax liability by the withheld amount.

References

About the Author

Ashley Mott has 12 years of small business management experience and a BSBA in accounting from Columbia. She is a full-time government and public safety reporter for Gannett.