What Is a 1099 Form? Your Complete Guide to Non-Employee Income and Tax Reporting

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A 1099 is a tax document reporting nonemployment income to the IRS. There are several types of 1099 forms, depending on the income you receive — but all are designed to report payments you received to the IRS.

If you are a contract employee, drive for Uber or earn money as a nonemployee in any capacity, you earn self-employment income. This income is usually reported on a 1099 form.

This guide breaks down exactly what a 1009 form is in detail, who typically gets a 1099 form, how it differs from a W-2 form and what you should do if you receive a 1099 form.

What Is a 1099 Form?

A 1099 tax form is a statement generated by any entity or person — excluding your employer — that details an amount of money that you were paid. Copies of the form are sent to both you and the IRS. The type of 1099 you receive can depend on the entity or person — aka the payer — sending the form.

Here are a few examples of when you might receive one:

• You’re self-employed. You might receive a 1099-NEC from a client reporting payments made to you.
• You own a business. You might use the 1099-NEC form to report payments you made to others as part of your business.
• You had debt canceled. If part of your credit card debt was canceled, you might receive a 1099-C,
• You earned interest from a bank account. If you received interest from a financial institution, you might get a 1099-INT from your bank.

Just because you receive a 1099 tax form doesn’t mean you automatically owe taxes on the income you were paid. You might be able to use deductions or other tax loopholes to eliminate or reduce your tax liability. No matter if you end up owing or not, however, it’s vital that you report the income listed on the 1099 to the IRS if required.

Who Gets a 1099 Form?

A 1099 form is issued when certain forms of income are paid out. From contract work, to royalty earnings, to savings account interest could result in your receiving a 1099 form.

Here are a few reasons why you might receive a 1099 form:

• Independent contractor / freelancer income
• Earning interest or dividends on your investments
• Receiving certain government payments
• Having your debt canceled
• Selling real estate

Good To Know

You’ll get a 1099 for income earned in excess of $600. This includes 1099-NEC income and 1099-MISC income. For income earned through online marketplaces and payment apps like Venmo, you’ll only receive a 1099-K form after receiving $2,500 in income.

Some forms of income require sending a 1099 after just $10 in income — such as royalties and broker payments in lieu of dividends or tax-exempt interest.

Important note: You must report income even if you don’t receive a 1099.

1099 vs. W-2: Understanding the Difference

Both 1099 forms and W-2 forms report income you have received. But they are designed for different types of income.

Here’s a breakdown of a few differences between W-2 and 1099 forms:

W-2 Forms

W-2 income is reported when you receive payment from a job that you are a part-time or full-time employee of.

• Issued by employers to employees
• Reports wages, salaries, and withheld taxes

1099 Forms

1099 forms are used for other types of income, including contract income, rents, royalties, interest, or dividends received.

• Issued by businesses or entities for non-employment income
• No taxes withheld by the payer, which implies self-employment tax responsibility
• Implications for the taxpayer, such as estimated taxes or deductions

Key Types of 1099 Forms Explained

There are over a dozen 1099 forms available from the IRS, but there are a few common ones that affect contract workers, freelancers, and workers that receive income from sources outside of their job. Here’s what you need to know:

1099-NEC vs. 1099-MISC: What’s the Difference?

Two of the most common 1099 forms are the 1099-NEC and 1099-MISC. 

1099-NEC

The 1099-NEC form is issued for nonemployee compensation, such as freelance work, and is usually sent to contractors and service providers paid at least $600 or more.

1099-MISC income is generally reported on your personal tax return.

1099-MISC

The 1099-MISC form is for other types of income, such as rents, royalties, prizes, awards and other non-service related income. You’ll usually get a 1099-MISC for receiving these types of income over $600, though there may be lower or higher reporting thresholds for certain types of income.

In general, you’ll need to report 1099-NEC income on your business tax return, whether that’s a Schedule C or other type of business return.

Both 1099-NEC and 1099-MISC forms are due on Jan. 31, unless the entity sending the form is paper filing. 

When Do You Receive a 1099-MISC Form?

You might receive a 1099-MISC form if you receive money from other sources outside of your job. This is used to report different types of income, such as:

• Rent
• Royalties
• Prizes
• Awards
• Healthcare payments
• Attorney payments
• Other income not paid for your services

In general, if you receive at least $600 in income from one of these sources, you’ll get a 1099-MISC in the mail. However, for royalties or broker payments in lieu of dividends or tax-exempt interest, that baseline is only $10.

When Do You Send a 1099-MISC Form?

If you’re a business owner and you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment, you’ll need to send that person or business a 1099-MISC form for reporting purposes.

Deadlines to receive 1099-MISC tax forms:

• Standard: Jan. 31
• Tax return by paper: Feb. 28

Other Common 1099 Forms

Here’s a summary of the types of 1099 forms and what they are used for:

Here are a few other common 1099 forms to be aware of:

• 1099-INT (Interest Income): If you earned interest in a Savings account or a CD, you might receive a 1099-INT form.
• 1099-DIV (Dividends and Distributions): If you own investments that pay out dividends, you may receive a 1099-DIV form.
• 1099-K (Payment Card and Third Party Network Transactions): If you received business income from an online marketplace (like Facebook) or through a payment app (like Venmo), you might receive a 1099-K form.
• 1099-R (Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs): When you withdraw money from a retirement account, annuity, or pension, you’ll get a 1099-R form.
• 1099-C (Cancellation of Debt): If you have any debts cancelled, you’ll have to report that amount as income, which is listed on a 1099-C form.
• 1099-G (Certain Government Payments): If you received any unemployment income, or other government payment, you might receive a 1099-G form.

What To Do When You Receive a 1099 Form

If you receive a 1099 form, the first thing you should do is check the details of the form for accuracy. All 1099 forms are sent directly to the IRS, so if there’s a mistake, the IRS may believe you owe more in taxes than you actually do.

You’ll also want to make a copy and keep the 1099 form for your records. It’s a good idea to scan the form and keep digital copies just in case you lose the paper copy.

You’ll then want to enter the details of the 1099 form into your chosen tax software, or give it to your tax preparer to enter into your tax return. This will give you an idea of how the 1099 income will impact your taxes.

Don’t Let This Cost You

Don’t ignore a 1099 form. This could cost you more money and increase your tax bill. You must report all 1099 income, regardless of whether it’s taxable or not.

How To File a 1099 Form

If you own a business and are paying independent contractors to do work for you, you’ll need to file a 1099-NEC form for nonemployee compensation. To file the form, you’ll need to complete the following: 

1. Gather Information

Obtain W-9 forms from your contractors to have the details needed to complete the 1099 form. If you haven’t yet completed a W-9 for your contractors, you can download the form directly from the IRS website.

2. Complete the Form

You’ll use the information from the W-9 form and your payroll to complete the 1099-NEC form. This includes filling in the following details:

• Your business name and address
• Your business Taxpayer Identification Number (TIN)
• Recipient’s name and address
• Recipient’s Taxpayer Identification Number (TIN)
• Total amount of nonemployee compensation
• Any other payments made
• Federal taxes withheld, if any
• State tax withheld, if any
• State location and income

3. Send a Copy to the Recipient

When you fill out a 1099, there are multiple copies made. Copy B must be sent to your contract worker by the due date, which is Jan. 31.

4. Filing With the IRS

The first copy of the 1099 form (Copy A) can be mailed to the IRS or filed electronically through the IRS IRIS portal or your payroll software.

If you have 10 or more informational returns, you must electronically file. You must send 1099s to the IRS by Jan. 31.

5. Filing With Your State

Some states also require 1099 filing, and you’ll need to send your state a copy of the 1099 form by the form due date, usually Jan. 31.

Potential Tax Implications of 1099 Income

If you receive a 1099 form, it usually means you received income of some sort, and you’ll need to report it to the IRS. In most cases, this will increase your taxable income, whether it’s business income or personal income.

If you receive a 1099-NEC for business income purposes, you’ll need to report it on your business tax return. This could be on Schedule C if you’re a sole proprietor, or on another business tax return form if you’re incorporated. In addition to federal taxes, you’ll also owe Social Security and Medicare taxes, as well as unemployment taxes.

If you receive enough 1099 income, you may need to start filing quarterly estimated taxes to ensure you’re paying federal taxes as you earn. While most employers do this automatically for you — if you’re self-employed — you’ll need to send payments to the IRS to ensure you don’t end up paying additional fees when you file your return.

But you may not owe as much in taxes as you think when earning 1099 business income. This is because — as a business owner — you have access to far more tax deductions than a regular employee. It’s a good idea to work with a licensed tax advisor when you have 1099 income so they can help you lower your tax burden through legal business tax deductions.

Your Next Steps After Receiving a 1099

If you receive a 1099 form, you’ll need to report it to the IRS. A 1099 is simply a report of income you earned or received throughout the year. The IRS always receives a copy of your 1099, so you can’t ignore it.

There are many types of 1099s, so it can be a good idea to work with a licensed tax professional if you aren’t sure how to report your 1099 on your tax return. An enrolled agent or CPA can help you prepare your return, report your 1099 income accurately, and find ways to lower your tax bill.

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