What is a 1099 form? Everything you need to know
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ELI5: What is a 1099 form?
A 1099 form can be thought of as a “receipt” for income you received from someone else, similar to how a receipt is proof of a purchase you made.
It used to report income received from sources such as freelance work or rental income, to the IRS for tax purposes. It shows the total amount of money you received and it must be included on your tax return.
Just like a receipt, it’s a record of a transaction that occurred.
A 1099 form is a type of tax form that is used to report income you received from sources other than an employer.
A 1099 is different from a W-2 form, which is the form that your employer uses to report how much money they paid you and how much tax was withheld from your paycheck.
When to fill-out a 1099 form
Imagine that you started doing some online tutoring, and you made $500 over the year.
The company that you tutored for would need to send you a 1099 form to show how much they paid you. This is because they didn’t take taxes out of your pay like an employer would.
Even if you earned less than $600 from a source, they are still required to send you a 1099 form.
It’s important to note that 1099s are also sent to the IRS by the issuer to report the income. This makes it easy for the government to ensure that everyone is reporting all of their income accurately.
You should keep track of all the 1099s you receive, as you will need this information when you file your taxes. The government wants to make sure that everyone is paying the correct amount of taxes, and 1099 forms help them do this.
What types of payment require a 1099?
At least $10 in:
- Royalties (payments made to the creators or owners of a property, such as a book, song or patent, for the use of that property by others) and broker payments (commission, is a fee paid to a real estate broker for their services in facilitating a real estate transaction) that are paid instead of dividends or tax-exempt interest.
At least $600 in:
- Rent
- Prizes and awards
- Other income payments
- Medical and health care payments
- Payments to an attorney
- See IRS website for more
At least $5000 in:
- direct sales of consumer products to a buyer for resale anywhere other than a permanent retail establishment
Different types of 1099 forms
There are several different types of 1099 forms, each with a specific purpose.
- A 1099-MISC form is used to report income that was earned from self-employment, freelance work, or other types of income that was not earned through a traditional employer-employee relationship.
- A 1099-INT form is used to report interest income that was earned from a bank account or other investment.
- A 1099-DIV form is used to report dividends, which is a type of income that people receive when they own stocks in a company.
- A 1099-G form is used to report government payments, like unemployment benefits or state tax refunds.
- A 1099-R form is used to report distributions from pensions, annuities, retirement plans, and other types of tax-deferred savings plans.
It’s your responsibility to file a 1099
It’s important to note that if you received a 1099 form, it means the company or entity that paid you more than $600 in the previous year. And the company or entity is required to send you a copy of the form by January 31st and send the same copy to the IRS. And the onus is on you to file the form and pay taxes on the reported income.
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FAQ about 1099 forms
What is a 1099 form?
A 1099 form is a tax form used to report income received from sources other than an employer. It is used to report income such as freelance work, rental income, or investment income to the IRS.
Who needs to file a 1099 form?
Any individual or business that pays out $600 or more to another person or entity during a tax year is required to file a 1099 form for that person or entity.
When are 1099 forms due?
1099 forms are due to the recipient by January 31st and to the IRS by February 28th. If you file electronically, the due date is extended to March 31st.
What information is required on a 1099 form?
A 1099 form requires the recipient’s name, address, and taxpayer identification number (TIN), as well as the total amount of income paid to them during the tax year.
Can I file a 1099 form electronically?
Yes, you can file 1099 forms electronically through the IRS’s FIRE system.
Are there different types of 1099 forms?
Yes, there are several different types of 1099 forms, each used to report a specific type of income. Some examples include 1099-MISC for miscellaneous income, 1099-INT for interest income, and 1099-DIV for dividend income.
What happens if I don’t file a 1099 form?
Failure to file a 1099 form can result in penalties from the IRS. The amount of the penalty will depend on how late the form is filed and whether it was filed intentionally or not.
Can I get a copy of my 1099 form from the IRS?
Yes, you can request a copy of your 1099 form from the IRS by submitting Form 4506, Request for Copy of Tax Form.
Can I file a 1099 form for a person who is not a citizen?
Yes, you can file a 1099 form for any person or entity that you have paid $600 or more to during a tax year, regardless of their citizenship status.
More information on 1099 forms
That was just a quick introduction. Check out these links to learn more:
