FORM 1099

What is a 1099 Form?

·?The IRS 1099 Forms are a group of tax forms that document payments made by an individual or a business that typically isn’t your employer.

·?????? The business that pays the money fills out the form with the appropriate details and sends copies to you and the IRS. The form reports payments made during the tax year.

·?????? In some instances, a copy is also sent to your state taxing authority. The payer is responsible for filling out the appropriate 1099 tax form and sending it to you.

·?????? The IRS requires payers to provide most 1099 forms by January 31. In certain instances, the date is February 15.

What is a 1099 Form used for?

1099 Form documents payments from someone that typically isn’t your employer. This can be an individual, business, or entity, such as the government.

There are different 1099 forms that report various types of income and how they were earned. These payments might be for interest, dividends, non-employee compensation, retirement plan distributions.?

If you receive a 1099 form, it’s your responsibility to report the income earned on your tax return.

Who receives a 1099 Form?

Some common examples when you might receive a 1099 include:

• You should receive a?Form 1099-NEC?if you earned $600 or more in nonemployee compensation from a person or business who isn’t typically your employer.
• You should receive Form?1099-MISC?if you earned $600 or more in rent or royalty payments.
• You should receive?Form 1099-G?if you received a state or local tax refund during the previous year.

Likewise, if you paid a freelancer, independent contractor or other nonemployee $600 or more during the year related to your trade or business, you likely should send them a Form 1099-NEC.

What’s the difference between the 1099-NEC vs. 1099-MISC?

What is the difference between the 1099-NEC and 1099-MISC forms? Before tax year 2020, business owners primarily used Form-1099 MISC to report nonemployee compensation. Starting in 2020, the IRS reintroduced the 1099-NEC Form to report nonemployee compensation. This change was made to provide a separate filing deadline for nonemployee compensation. Payments that use Form 1099-MISC have different deadlines.

Nonemployee compensation can include any payment for any services performed by a person who is not an employee. These individuals are commonly known as freelancers or independent contractors. Nonemployees are individuals that are not employees who are used by a business to do work. They can typically control or direct the outcome of the work but not?what?will be done or?how?the work will be done. Contract workers are also typically required to pay self-employment taxes.?

In contrast, as an employee, your compensation is usually reported on a?Form W-2.

Now, Form 1099-NEC reports nonemployee compensation. The 1099-MISC still exists to report other types of miscellaneous income.

What are the other types of 1099 Forms?

What do I do if I don’t get all of my 1099 forms?

Even if you don’t receive the appropriate forms, you’re still responsible for paying taxes on all of your taxable income. If you didn’t receive a 1099, you still need to report the appropriate amount of income on your tax return. This will help you avoid a bill from the IRS for owed taxes and possible penalties.

If you haven’t received all your 1099s by the January 31st or February 15th deadlines, contact the person or business responsible for sending you the 1099 and request that they send you a copy of your 1099.

Can I file a 1099 Form electronically?

Yes, 1099 Forms can be filed electronically.?

You can file your 1099 form through tax service software or on paper forms. Filing tax forms electronically can offer several benefits, such as:

• Faster processing times
• Improved accuracy
• Increased security
• Ability to track the status of your tax return

What do I do if there is an error on my 1099 Form?

If you receive a 1099 form with an error, reach out to the business as soon as possible. Ask them to correct the error.?

In some cases, they may be able to correct the error before sending the incorrect 1099 form to the IRS.

If you’re an employer who submitted an incorrect 1099 Form, you’ll have to file a corrected form. Use the same method you used for the original form. Once complete, send a recipient copy to your contractor that they can use to file their taxes.

Who sends 1099 forms?

Several types of 1099 forms exist to document payments made between individuals or businesses and another party. You can receive various 1099 forms for different reasons.

One of the most popular 1099 forms is the 1099-NEC for non-employee compensation payments.

If you’re an independent contractor or freelancer, you may receive a Form 1099-NEC documenting payments made to you throughout the year from a particular payer.

Payers who make Nonemployee Compensation payments below $600 are typically not required to file the 1099-NEC unless the payer withholds any amount of tax from the payments.

However, they may do so if they wish. If you received less than $600 from a payer, you are still required to report the income on your tax return.

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When are 1099s issued?

There are different due dates for different types of 1099 forms.

For example, Form 1099-NEC is due by January 31st. If January 31st isn't a business day, then the due date moves to the next business day.

If you’re the one sending 1099 forms:

1. Most 1099 forms are due to the recipient by January 31.
2. If you’re mailing a paper form to the IRS, you typically have to send the 1099 by February 28 (postmarked by that date).
3. If you're using tax software like TurboTax to send the forms to the IRS, we'll import the information for the form for you.
4. Forms 1099-NEC are due to recipients and to the IRS by January 31 regardless of whether they are electronically or paper filed.

Payers are required to send you these forms early in the tax season. This gives you time to prepare your tax return. It also allows the IRS to have evidence of certain income you received during the tax year.

Despite the early due dates for sending these forms as a payer, you won’t need to file your own income tax return until the tax filing deadline.

The early due dates allow the IRS to verify the income that individuals report on their tax returns. This helps the IRS detect refund fraud more easily.

The 22 types of 1099s

Here are all 22 types of 1099s, listed in alphabetical order.

1099-A

Form 1099-A?documents "acquisition or abandonment of secured property." If you lost a property to foreclosure, your lender will send you this form so you can document capital losses. Over 300,000 properties had foreclosure filings in 2022, according to a?report from ATTOM, a real estate data company.

If your foreclosure price didn't cover the remaining balance of your mortgage, and your lender determines that you can't pay it, they may forgive your debt. If this happens, also expect to receive Form 1099-C, since cancelled debt is considered income.

1099-B

Form 1099-B?documents income from the sale of securities at a brokerage or barter exchange. If you sold stock last year, the gain or loss will be reported on a 1099-B. Even if you sold at a loss, be diligent about filing this form. You may be able to carry over some of your losses to the following year, offsetting tax potentially owed on future gains.?

1099-C

Form 1099-C?documents the cancellation of debt. If your debt was forgiven, your lender will send that documentation to both you and the IRS. Your debt is considered taxable income in the year that it's forgiven. Examples of canceled debt include property foreclosure or a charge-off on a credit card.

Form 1099-C does not apply to most debts discharged from bankruptcy.

1099-CAP

Form 1099-CAP?documents "changes in corporate control and capital structure." If you owned stock in a company, and the company was acquired or underwent a substantial change in capital structure, you may have to report any cash, stock and/or property that was gained as a result of this change.

1099-DIV

Form 1099-DIV?documents income earned from?investment?dividends and distributions. If you have a brokerage account that holds stocks or mutual funds, and these investments paid out dividends, that counts as income. This dividend income does not apply to dividends accrued in tax-sheltered retirement accounts, such as a?401(k)?or IRA.

1099-G

Form 1099-G?is used to report unemployment compensation or other certain government payments, such as refunds on state or local taxes, taxable grants or payments from the Department of Agriculture.

1099-H

Form 1099-H?documents payments made in advance to help offset certain qualifying health insurance expenses.

From 2002 to 2021, the Health Coverage Tax Credit provided relief to taxpayers receiving Trade Adjustment Assistance (TAA), reemployment TAA or benefits from a Pension Benefit Guaranty Corporation. This legislation helped reduce health insurance costs for vulnerable Americans in the form of a tax credit.

There are legislative efforts to make this program permanent, but negotiations are stalled in the US Senate as of this writing. If you are filing or amending returns from past years, you may encounter this form.

1099-INT

Form 1099-INT?documents interest you earned on savings. For example, if you have a?high-yield savings account, and the interest on that account came out to $50 this year, both you and the bank are required to report that money as income, and you'll owe taxes on it.

Banks are diligent about sending out 1099-INT forms in a timely manner. If you only receive paperless statements, you'll likely receive this form electronically.

1099-K

Form 1099-K?documents income you received via third-party payment processing platform. It's similar to nonemployee compensation, but it means you received payment through PayPal, Venmo or Cash App instead of directly from the business.?

Previously, payment processing companies only had to distribute a 1099-K if you had over 200 transactions that together amounted to $20,000 or more in income during a given year. The IRS has a goal to lower this threshold to $600 a year, but is rolling this threshold out in stages to prevent overwhelm for both the agency and taxpayers. For the 2023 tax year, expect a 1099-K if you received over $5,000 in payments from a third-party processor.

Tax experts say the new 1099-K conditions will be a bumpy ride at first, particularly because some taxpayers might get a 1099-NEC and a 1099-K for the same income. "Don't report both, or you'll be double taxed," said Taylor. She also noted that a 1099-K form reports gross income. Since you likely paid fees to the payment processing platform in order to use their service, be sure to include these expenses in your deductions.

1099-LS

Form 1099-LS?documents acquired interest in a life insurance contract.?

The?Tax Cuts and Jobs Act of 2017?added a new section to the Internal Revenue Code called section 6050Y. This code included new regulations for "reportable policy sales" of life insurance, and the IRS created two new 1099 forms to document this activity: Form 1099-LS and Form 1099-SB.

Companies and individuals will receive Form 1099-LS if they acquired a life insurance contract or any interest in a contract. For example, if a company acquired another company, and part of that company's assets included life insurance holdings, the policy sale needs to be reported.

If a sale occurred, it must be documented with the IRS, and all parties involved will receive a 1099-LS as a result.

1099-LTC

Form 1099-LTC?documents income received as a result of long-term care or accelerated death benefits.

Long-term care insurance is a way for people to navigate the uncertainty of how much care they'll need in their elder years. You may receive a 1099-LTC if your insurance policy is actively being used.

An accelerated death benefit is when a life insurance policyholder receives their benefits before death because they have been deemed terminally ill by a doctor. This benefit is intended to help cover medical costs and make the policyholder comfortable.

1099-MISC

Form 1099-MISC?documents miscellaneous income. If you received a payout of over $600 in a given year from a business, you should have received a 1099-MISC. Types of income include prize money, gross proceeds payments to attorneys and rental payments for space or equipment. Form 1099-MISC was previously also used to document nonemployee compensation, but this was discontinued in 2020 when Form 1099-NEC was reintroduced.

Because the MISC has turned into an actual miscellaneous category now and no longer includes compensation, "there's not much that goes into that category anymore," said Pino. Purchasing a house is now the most common reason for receiving a 1099-MISC, according to Pino, since you'll have one-time property tax and mortgage-interest deductions.

1099-NEC

Form 1099-NEC?documents nonemployee compensation. You'll receive this form if you were self-employed (gig worker, freelancer) or did independent contractor work amounting to over $600 last year.?

As mentioned above, this income used to be reported on the 1099-MISC until 2020. If you've been freelancing for years and no longer receive a 1099-MISC form but receive this one instead, that's why.

If you're on contract with a company but not a full-time employee, and you're being paid based on contract terms, you should expect a 1099-NEC, according to Taylor.?

If you receive independent contractor income, the IRS will classify you as a sole proprietor, even if you don't have a formal business entity, and you may owe self-employment taxes on the income.

1099-OID

Form 1099-OID?documents an "original issue discount."?

When you purchase a bond for less than its face value, that's called an original issue discount. You'll redeem the bond at its face value when it matures, and the IRS considers the difference between the two to be taxable income.

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1099-PATR

Form 1099-PATR?documents "taxable distributions received from cooperatives." If you are part of a cooperative, such as a farmer's co-op, and you received distributions or profits from the cooperative, you'll also receive this tax form.

1099-Q

Form 1099-Q?documents "payments from qualified education programs." If you received distributions from a 529 plan or Coverdell education savings account (CESA) for education expenses, you'll receive this form to document that income. The income may or may not be taxable.

1099-QA

Form 1099-QA?documents distributions made from an ABLE account. The?Achieving a Better Life Experience Act?of 2014 helps people who experienced the onset of a disability before the age of 26 save and pay for disability-related expenses using a tax-advantaged 529A ABLE account.

Many taxpayers who have a disability rely on public policy programs such as Supplemental Security Income (SSI) or Medicaid. These programs have low ceilings for how much income you can earn. For example, your monthly earned income must be under the Substantial Gainful Activity (SGA) threshold of $1,470, or $2,460 if you are blind. ABLE accounts were created to help taxpayers and their loved ones contribute to a savings account that can help pay for expenses associated with having a disability, and this wealth is not considered when determining eligibility for SSI or other programs.

Contributions to an ABLE account are post-tax, and any interest accrued in these accounts will be tax-free. Any distributions from these accounts will be documented on Form 1099-QA.

1099-R

Form 1099-R?documents "distributions from pensions, annuities, retirement or profit-sharing plans, IRAs and insurance contracts." If some of your income is coming from these sources, expect to receive a 1099-R.

1099-S

Form 1099-S?documents profits from a real estate transaction. If you sold real estate that appreciated in value, this difference is subject to capital gains tax. However, there are potential exemptions from this taxable gain.

The?Taxpayer Relief Act of 1997?gives many homeowners relief from this tax liability. If the home you sold was your primary residence, and you lived in it for at least 24 months, you are exempt from the first $250,000 of the gain ($500,000 if married and filing jointly). This exemption can only be applied every two years.

1099-SA

Form 1099-SA?documents "distributions from a Health Savings Account (HSA), Archer MSA or Medicare Advantage MSA." Whenever you make a withdrawal from a health savings account, the account holder will send you a 1099-SA to report this income.

HSAs?offer triple tax savings. The money you deposit in a health savings account is tax free before deposit and tax free upon withdrawal, and any interest earnings will be tax free as well. To be eligible for this tax benefit, your distributions must be used for qualifying health-related expenses.

1099-SB

Form 1099-SB?also documents the sale of a life insurance policy, but this form is filed by the original issuer of the policy after they have received a 1099-LS to document their investment and the surrender amount. The issuer must also file Form 1099-SB if the policy has transferred to a foreign person.

There are substantial rules and regulations for reportable policy sales, and these rules are fairly new. Consider working with a tax professional if you are a company or individual working with 1099-LS and 1099-SB forms.

SSA-1099

The?SSA-1099?documents Social Security benefits income. Noncitizens who live outside the US receive a version of this form called an SSA-1042S. The SSA-1099 and SSA-1042S aren't distributed to people who currently receive Supplemental Security Income (SSI).

Social Security income is taxed, but the amount of income that's taxed varies depending on several factors. If you need a replacement form, or want to check the status of your Social Security payouts, you can take care of that at?SSA.gov. Replacement forms are typically available after Feb. 1.

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