Pew Research reports that 16% of Americans have earned income by participating in the gig economy. This income is taxable, and the IRS needs to know about it. You may be familiar with Form 1099-MISC, but there are nearly two dozen types of 1099 forms, each meant for recording information about a distinct type of income. Below, we will offer an overview of who should be issuing and receiving different types of 1099 forms and take a closer look at some of the more common types you might encounter in the course of doing business.
What Are 1099 Forms?
Each type of 1099 form is an informational return meant to notify the IRS of any income outside of W-2 earnings. Since payments reported on a 1099 form do not encompass employee compensation, they typically do not include tax withholding. Occasionally, there may be an issue with the taxpayer ID where backup withholding is necessary, which should be indicated on the form. Those forms, which include taxpayer ID numbers and the amount earned, are sent by the taxpayer directly to both the IRS and the payee. In most cases, the payer must send the recipient a copy of a 1099 form by Jan. 31 of the following year when reporting nonemployee compensation payments, March 31 if they’re filing electronically and not reporting nonemployee compensation, or the last day of February if they’re filing by paper and not reporting such compensation. The payee must then report that income on their tax return, where it will be matched with IRS records.
Who Needs to File a 1099 Form?
Businesses of all sizes must issue 1099 forms when necessary. Each form must be filed on time and include both the amount paid and the correct taxpayer ID number, or else the payer could incur significant penalties. While there are some exceptions, in general, payments made to corporations, limited liability companies (LLCs) treated as S or C corps, tax-exempt organizations, or for rents do not need to be reported on 1099 forms. Sole proprietors, meanwhile, must also file 1099s for any payments issued during the course of ordinary business, but not for any personal payments. For example, a sole proprietor may hire a bookkeeper for their business, in which case they would issue a 1099-NEC; however, they would not issue one to their dog walker. Likewise, sole proprietors should report any 1099 income they’ve earned on Schedule C of Form 1040.
Types of 1099 Forms
The following 10 examples are common types of 1099 forms. Consult the IRS guidelines for a complete list of 1099s and instructions for each form. The barter exchange will report a fair market value of the barter income received throughout the year via Form 1099-B.
1099-C
If you’ve had a debt of $600 or more canceled during the reporting year, the creditor must issue Form 1099-C.
1099-DIV
If you or your business received dividends or capital gains of more than $10 from a taxable account, you’ll receive Form 1099-DIV from your brokerage or financial institution. This is reportable income, even if those shares were reinvested.
1099-G
Payments from the federal, state, or local government of $10 or more for credits, refunds, or offsets are reported to the IRS using Form 1099-G. Another common use for this form is for unemployment compensation of $10 or more.
1099-H
You’ll need this form if you or any qualifying family members received advance payments for health insurance.
1099-INT
Separate from dividends, if you received more than $10 in interest from a bank or credit union, you’ll receive Form 1099-INT.
1099-K
Form 1099-K applies for payments received via a third-party network or credit/debit transactions. Examples include drivers for rideshare networks, Etsy shop owners, Airbnb owners, and anyone who accepts credit or debit cards for their business. Currently, you will receive Form 1099-K if you’ve made over $20,000 and performed more than 200 transactions. However, due to a provision in the American Rescue Plan Act, for any settled payment transactions beginning Jan. 1, 2022, Form 1099-K requirements will drop solely to a $600 aggregate reporting threshold. Given the complexity of this form, it’s best to record all of your own transactions and carefully review your Form 1099-K with a certified tax preparer.
1099-MISC
1099-MISC is one of the most common 1099 forms. It is used to report a variety of miscellaneous payments to individuals. In general, the payer should issue Form 1099-MISC to any individual who has received at least $10 in royalty income and at least $600 for a variety of payments, such as:
Rental income (as long as it is paid to an individual, such as a property manager)Prizes or awardsFishing boat proceedsMedical and health care paymentsGross proceeds paid to attorneys
1099-NEC
Form 1099-NEC is another common type of 1099 and is used to report a certain level of income paid outside of W-2 wages. Sole proprietors and companies of all sizes will often use contractors or freelancers for a range of different jobs, such as bookkeeping, consulting, or handiwork. In this case, those businesses would issue a 1099-NEC to anyone they paid more than $600 for a service. Nonemployee compensation can include:
BenefitsFeesCommissions for nonemployee salespeoplePrizes and awards for services
1099-R
You will receive Form 1099-R if you received a distribution of retirement benefits from a retirement plan, even if it was only $10. You’ll also receive Form 1099-R if you initiate a rollover of your plan from one custodian to another, though this is not considered a taxable event.
