What Are 10 Things You Should Know About 1099s?

A 1099 form is used to report forms of non-employment income to the Internal Revenue Service (IRS). Businesses are typically required to issue a 1099 form to a taxpayer other than a corporation who has received at least $600 or more in non-employment income during the tax year. A taxpayer might receive a 1099 form if they received cash payments or dividends for owning a company's stock.

Each type of non-employment income requires a version of the 1099 form to report that income to the IRS for tax purposes. Independent contractors and freelancers who earn $600 or more in non-employment income should receive a 1099-NEC and report that on their tax returns. Dividend income is reported via 1099-DIV and interest on a 1099-INT.

The IRS matches nearly all 1099s and W-2 forms, the wage-report forms received from an employer, against taxpayers' Form 1040 tax returns or other tax forms. The IRS may notify you that you owe more money if they don't match.

Key Takeaways

Form 1099 is used to report certain types of non-employment income to the Internal Revenue Service.
Non-employment income for freelance and independent contract work must be reported on Form 1099–NEC.
The deadline to mail 1099s to taxpayers is usually Jan. 31 of the year following the tax year.
You're still responsible for paying any taxes owed on income earned during the tax year if a 1099 form isn't received.
Ask the payer to send and submit an amended form if you receive an incorrect 1099 that they've already sent to the IRS.

1. Who Should Receive a 1099 Form?

Form 1099 is used to report certain types of non-employment income to the IRS such as dividends from a stock or pay you received as an independent contractor.

Businesses must issue 1099s to any payee other than a corporation who receives at least $600 in non-employment income during the year. There are exceptions to the $600 threshold rule, however. A 1099 is typically issued by a financial services provider if you earned $10 or more in interest income.

2. Types of 1099s

There are many types of 1099s depending on the type of income earned during the tax year.

1099-INT

A 1099-INT is sent to taxpayers who earned more than $10 of interest in the tax year. Banks, brokerage firms, and other investment firms typically send out Forms 1099–INT.

1099-K

Form 1099-K is sent by payment companies, online marketplaces, or payment apps for goods or services they provide during the year. The $600 threshold for payment apps and online marketplaces to report payments on Form 1099-K was delayed for tax year 2023. The IRS is planning a threshold of $5,000 for tax year 2024.

1099-DIV

A 1099-DIV is typically sent to a taxpayer if dividend income was earned during the tax year. Dividends are usually in the form of cash payments paid to investors by corporations as a reward for owning their stock or equity shares.

1099-G

Form 1099-G is sent to those who receive money from the federal, state, and local governments. Taxpayers who received a local tax refund or unemployment benefits would likely receive a 1099-G.

1099-R

A 1099-R is issued when a taxpayer receives a distribution or payout from a pension, retirement plan, or individual retirement account (IRA). Certain annuities and life insurance contracts may also issue 1099-Rs.

Not all retirement distributions are taxable, however. Consult a tax professional if you're unsure whether you should pay taxes on a distribution.

1099-B

A 1099-B lists various transactions from a broker such as the sale of stocks, commodities, and other securities. Some types of bartering transactions executed through a barter exchange would also be listed and reported on a 1099–B form.

1099-S

Form 1099-S is issued to taxpayers for real estate transactions if they closed on a sale or an exchange during the tax year. Real estate transactions can include realizing gains or proceeds from the sale of land, commercial and industrial buildings, and residential properties such as homes or condominiums.

Proceeds realized from a real estate transaction can be exempt from taxes depending on your financial situation. Consider consulting a tax professional if you've sold or exchanged real estate.

1099-SA

Form 1099-SA form is sent to individual taxpayers who receive distributions from health savings, medical savings, and Medicare Advantage accounts.

1099-MISC

A 1099–MISC is typically issued for income that isn't included on other 1099 forms. This can include money received from prizes or awards.

1099-PATR

Form 1099-PATR reports cooperative patronage dividends and dividend payments associated with farms that may have to be included in taxable income.

1099-NEC

Businesses must report some types of non-employee compensation on Form 1099–NEC. Form 1099-MISC was used for this purpose before 2020.

Form 1099-NEC must be filed when a business pays a non-employee $600 or more in the tax year. A non-employee might be an independent contractor or any person hired on a contract basis to complete work, such as a graphic designer, writer, or web developer. Non-employee income can also include fees, benefits, commissions, and royalties. Some payments to attorneys that exceed $600 for the tax year must be reported on a 1099-NEC.

Self-employed taxpayers who earned less than $600 might not receive a 1099–NEC but they must still report all income when filing their tax returns.

Freelancers hired through a freelance marketplace such as Upwork may not receive 1099s unless the income exceeds a certain threshold. All income must be reported regardless of whether a 1099 was issued, however.

3. What If You Don't Get All Your 1099s?

Record all your tax documents to ensure that you've received them in time to file your taxes. Contact the employer or payer to request the missing documents if you haven't received a 1099. Taxpayers must still file their tax return by the tax filing day for that year if their 1099 doesn't arrive in time, although they can request an extension of time to file from the IRS.

The IRS will send you a letter⁠ or bill telling you that owe taxes on the income if a company submits a 1099 form to the IRS but you don't receive a copy for some reason so you haven't reported that income. This letter might not arrive promptly so it's important to remember that you're responsible for paying the taxes you owe even if you don't receive the form.

The taxpayer might be able to report it under miscellaneous income if they haven't received the expected 1099 for income earned even if the business didn't file the 1099 form.

4. Make All Address Changes

The information will be reported to the IRS and to your state tax authority based on your Social Security number (SSN) regardless of whether the payer has your correct address. It's important to update your address directly with payers.

Taxpayers don't have to include their 1099s when they file their tax returns but it’s a good idea to keep the forms with your tax records in case of an audit.

5. The IRS Gets Your 1099s, Too

Any Form 1099 that's sent to you is sent to the IRS, too, often a little later. The deadline is Jan. 31 for mailing 1099s to most taxpayers but the IRS may delay that deadline in a given tax year.

Many are due to the IRS by the end of February. Some payers send them simultaneously to taxpayers and the IRS but most mail taxpayer copies by Jan. 31 and then wait a few weeks to collect all IRS copies, summarize them, and transmit them to the IRS. This is usually done electronically.

6. Report Errors Immediately

The time delay between sending 1099s to taxpayers and to the IRS gives you a chance to correct obvious errors⁠ so don't just put your arriving 1099s in a pile to be addressed later⁠.

Tell the payer immediately if you receive a 1099-MISC on Jan. 31 that reports $8,000 worth of income when you were only paid $800 by the company. There may be time for them to correct the form before sending it to the IRS.

Ask the payer to submit a corrected form if they've already dispatched the incorrect form to the IRS. There's a special box on the form to show that it's correcting a prior 1099 to ensure that the IRS doesn't add the amounts together.

Taxpayers who are unsure about the amount of income earned or how that income should be reported should seek help from a tax professional.

7. Report Every 1099

The key to Form 1099 is computerized matching by the IRS. Every Form 1099 includes the payer's employer identification number (EIN) and the payee's Social Security or taxpayer identification number. The IRS matches nearly every 1099 form with the payee's tax return.

Explain it on your tax return if you disagree with the information on the 1099 form but you can't convince the payer you're correct. Suppose you received a $100,000 payment from your car insurance company to cover your medical expenses and pain from a whiplash injury you suffered in an accident. Payment for personal physical injuries is excludable from income and it typically shouldn't be reported on a Form 1099.

Try to explain it on your tax return if you can't convince your insurance company to cancel the 1099. One possibility is to include a zero with a "see note" on line 7a, the "other income" line of a 1040 form, which is then reported on line 8 of Schedule 1.

Show something like this in the footnote:

Payment erroneously reported by XYZ Insurance on Form 1099: $100,000

Amount excludable under Section 104 for personal physical injuries: $100,000

Net to Line 7a: $0

There's no perfect solution, but you can't just ignore the situation because the IRS won't.

8. Don't Overlook a 1099 Form

No one wants a tax audit and several things can provoke one. The IRS will send you a computer-generated letter billing you for the tax on the interest if you forget to report the $500 interest you earned on a bank account. Pay it if it's correct. Respond to the IRS with a letter of your own if it's incorrect or contact a tax professional to respond to the IRS on your behalf.

9. Don't Forget State Taxes

Most states have an income tax and they receive the same information the IRS does. Your state will probably catch up with it if you miss a 1099 form on your federal return.

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10. When to Ask for Help

Taxpayers are responsible for reporting their income and filing their tax returns but there are times when you don't know what to do about a situation. Ask for help from the IRS or a tax advisor in these situations.

The IRS suggests that you contact them if you don't receive a 1099-R for distributions from a pension or retirement plan and contacting the payer hasn't resolved the issue. The IRS will contact the payer or employer on your behalf.

What Is 1099 Form Used for?

The 1099 form is used to report non-employment income to the Internal Revenue Service (IRS). Businesses are typically required to issue a 1099 form to a taxpayer (other than a corporation) who has received at least $600 or more in non-employment income during the tax year. A taxpayer might receive a 1099 form if they received dividends which are cash payments paid to investors for owning a company's stock.

Do I Have to Pay Taxes on a 1099 Form?

Income that's been reported on a 1099 is typically taxable but many exceptions and offsets can reduce taxable income. Let's say a taxpayer has a gain from the sale of a home because the selling price was higher than the original cost basis. The taxpayer might not owe taxes on that gain because they may qualify for an exclusion of up to $250,000 of this money depending on their tax situation.

It's best to consult a tax professional if you're unsure whether you have to pay taxes on your 1099 income.

Who Should Receive a 1099 Form?

Anyone who was paid $600 or more in non-employment income should typically receive a 1099 but there are many types of 1099s for various situations. There are also many exceptions to the $600 rule. You may receive a 1099 even if you were paid less than $600 in non-employment income during the tax year.

Do I Need a 1099 Form to File Taxes?

Taxpayers must report all sources of income even if they don't receive their corresponding 1099 form. They don't have to send their 1099 forms to the IRS when they file their taxes, however. The IRS receives its own copy of the 1099 from the issuer or payer and it includes the taxpayer's Social Security number.

What's the Difference Between a 1099 and a W-2?

A 1099 form shows non-employment income such as income earned by freelancers and independent contractors. Form W-2 shows the annual wages or employment income that a taxpayer earned from an employer during the tax year. A W-2 shows the taxes withheld by the employer from the employee's salary throughout the year, unlike a 1099.

The Bottom Line

A variety of 1099 forms exist because there are many types of income, including interest income, local tax refunds, and retirement account payouts. Taxpayers must report all their income when they file their tax returns regardless of whether they receive their 1099s. They don't have to send their 1099 forms to the IRS when filing but they should report any errors that appear on their 1099s.

It's essential to consult a tax professional if you own a business and you're unsure about issuing 1099s. Seek tax help if you're a taxpayer with questions about your non-employment income or how to report that income properly to the IRS.