At tax time, tracking down all the necessary forms can be exhausting. For most people, a W-2 Form will arrive in the mail that you’ll use to file. But if you earned extra income during the year, you’ll also receive a 1099 Form at tax time that you’ll use to report your earnings to the IRS.
What Are 1099 Forms?
Also known as an information return, Form 1099 is used to report other income payments outside of salaries and part-time wages paid during the year. Those paying the extra income will submit Form 1099 to the IRS, sending a copy to the recipient of that money. The recipient will then be expected to report that income to the IRS.
Any employer who took out taxes on money paid to you will send you a W-2 that you’ll submit to the IRS. But you’ll also get 1099s for any untaxed money you receive. Failure to receive a 1099 does not release you from the obligation to report that income. You’re still expected to report all the money you have earned, even if it was paid in cash.
Read More: How Does a 1099 Form Work?
Where to Get 1099 Forms
If you run a business, you’ll need to have all the appropriate tax forms handy at tax time. If you use an accountant or tax preparation software, you can use what’s supplied there. You may also print out the current version of every 1099 form at the IRS website.
For those who are receiving 1099 Forms from businesses or other entities, it can be frustrating to try to chase them down every year. In lieu of receiving a form, you can simply report the income on the appropriate tax forms where prompted. A company is only required to issue you a 1099 Form if you were paid $600 or more during the tax year.
That $600 threshold doesn’t help you as a taxpayer, though. If you earned any money at all, you’ll have to track it, and if your earnings exceed $400 from all nonpayrolled sources during the year, you’ll need to pay self-employment tax on that money.
Income and Distribution 1099 Forms
For most people, 1099 Forms will relate to miscellaneous income earned during the tax year. Maybe you earned financial prizes and awards from contests you entered, or perhaps you did some gig work through a food delivery or rideshare platform. Here are the most popular income-related 1099s you may receive:
- 1099-MISC: Form 1099-MISC covers all income a business pays you that wasn’t nonemployee compensations, like expense reimbursements. In other words, if you worked as a contractor for a company and the money given to you was untaxed at the time, you’ll get a 1099-MISC at tax time. You’ll also receive a 1099-MISC if you’re a landlord and were paid more than $600 in rents during the year.
- 1099-NEC: Self-employed professionals may receive Form 1099-NEC instead of Form 1099-MISC. Both forms give you the information you need to claim your income on your taxes, so neither is better than the other.
- 1099-R: If a retirement or profit-sharing plan issued you payments of $10 or more during the tax year, you’ll get a Form 1099-R. These forms relate to distributions from IRAs, annuities and insurance contracts.
- 1099-SA: It’s fairly easy to remember when you’ll use 1099-SA. It’s used to report distributions from your health savings account or medical savings account. Both are savings accounts that let you use pretax money to pay medical expenses.
- 1099-G: You’ll see Form 1099-G at tax time if you received certain government payments during the tax year. These include unemployment compensation, state or local income tax refunds and taxable grants.
Banking and Investment 1099 Forms
If you have an interest-bearing savings account or invest some of your money, you might receive payments on those funds during the year. In that case, you’ll receive forms at tax time that you’ll have to submit to the IRS. Those forms include:
- 1099-INT: This is probably the most common extra form. The 1099-INT documents any interest you received on your savings account balance. You might not receive this form unless you were paid more than $10 in interest during the tax year.
- 1099-DIV: If you have investments, you’ll see a 1099-DIV at tax time. This covers any dividends or other distributions you received from those investment accounts.
Read More: What is Form 1099-NEC
Forms for Businesses
There are some forms specific to businesses. If you run a business, it’s important to be aware of the forms you need. Here are some of the most popular 1099 business forms.
- 1099-NEC: These forms are issued to independent contractors and self-employed individuals to report nonemployee compensation during the year. If you pay contractors, you’ll need to issue these forms to anyone you paid $600 or more.
- 1099-K: Form 1099-K is specific to payment card transactions. If you received payments from customers who used debit, credit or stored-value cards, this form applies to you. You also may see it if you received third-party network transactions.
- 1099-CAP: Large corporations will file this form for shareholders if there’s some type of change in the corporate structure during the tax year.
- 1099-C: This form is specific to the cancellation of debt. Businesses file Form 1099-C if a debt of $600 or more is canceled during the tax year.
Read More: What Is the Maximum Earnings Before Issuing a 1099?
Consequences of Unreported Funds
The IRS monitors for discrepancies. Whether you’re responsible for issuing the form or not, there is a certain expectation of income and expenses that apply to every taxpaying entity. So, if your spending doesn’t match your lifestyle and your earnings, the IRS will take notice.
Mostly, though, the IRS compares reporting from multiple tax returns. So if you, as a contractor, don’t report your earnings and your clients do, you could be busted. Once caught, you’ll either be sent a request for clarification or subjected to an audit, at which point you’ll be responsible for taxes owed plus penalties.
Ensuring Tax Compliance
The best way to stay out of trouble with the tax guys is to track your income from start to finish. You can find software that will do the work for you, including possibly your bank’s reporting features. If you’re regularly earning untaxed income, consider setting up a separate bank account so that income is separate from your regular earnings.
There are some instances where you aren’t required to report every dime you make. If you’re simply selling personal items through garage sales or on marketplaces like eBay, this typically falls under the occasional garage or yard sale header. But the IRS will start taking notice when you start earning hundreds of dollars doing this, so it’s best to track it.
There are a variety of ways you can earn taxable income throughout the year. When that happens, you’re expected to let the IRS know about it at tax time. If you receive 1099s in the mail, that will make it easier to slide it into the proper box on your tax form. But even if those 1099s never arrive, you’re still expected to report the funds and pay taxes on them, with few exceptions.
- IRS: Am I Required to File a Form 1099 or Other Information Return?
- IRS: Forms, Instructions & Publications
- IRS: More in Help
- IRS: About Form 1099-NEC, Nonemployee Compensation
- IRS: About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
- IRS: About Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
- IRS: About Form 1099-G, Certain Government Payments
- IRS: About Form 1099-INT, Interest Income
- IRS: About Form 1099-DIV, Dividends and Distributions
- IRS: Understanding Your Form 1099-K
- IRS: About Form 1099-C, Cancellation of Debt
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.