1099 Form: What Is It And How Do You Fill It Out?
Scott Steinberg4-minute read
December 10, 2021
You may have received a 1099 tax form in the mail, but what do you use it for? How does it relate to a W-2 form? And what purpose do 1099 tax forms serve?
Noting that a 1099 form is also known as an “information return,” the answers to these questions will be helpful to know come tax time, as you might imagine. Read on to find out more about 1099 forms, how they work and how to accurately fill them out.
What Is A 1099 Form?
There are several kinds of 1099 forms, but in general, a 1099 form is used to report payments that come from other sources besides a full-time employer. Included on tax returns, these include income that comes from rent, royalties, dividend and interest payments, gambling winnings and other non-employer-based payouts.
If you’re a freelance or independent contractor, you can expect to receive a 1099 form annually, which details money paid out to you throughout the calendar year. A 1099 form – which you should receive by January 31 each year – will summarize nonsalary income, allowing you to report the prior year’s payments to the IRS for federal tax purposes.
How Does A 1099-MISC Form Work?
The most common form of 1099 is the 1099-MISC, which is issued each year to millions of freelance workers and individuals working side jobs. Under this working scenario, employers do not pay tax. Taxes are paid by the freelance or gig worker, who reports these earnings to the government via the 1099-MISC form.
If someone else paid you for services during the year but isn’t a full-time employer, you can think of this 1099 form as equivalent to the W-2 form that a full-time employer would send. Note that it’s among the most basic forms of tax reporting for independent contractors.
Who Gets A 1099 Tax Form?
If you’re self-employed, a freelancer or an independent contractor, you can expect to receive a 1099 instead of a W-2. If In fact, if you’ve been keeping busy with independent contracting, you can expect to see several: That’s because you’ll receive one from everyone you’ve done a job for over the past year that brought in over $600.
Where Do You Get A 1099 Form?
If you’re an employer who needs to file a 1099 form, you can obtain a copy of a 1099 form directly from the IRS website. To submit a 1099 form, you can send it electronically or by mail.
If filing this form for your contractors electronically, you will use the form online.
But if you plan to send in the 1099 form via mail, these forms must be ordered in hard copy format; they cannot be downloaded from the website.
However, be advised: If you’re a freelancer or independent contractor, employers should be sending these forms to you by January 31 of each year – forms whose insights you will then share with the IRS.
Types Of 1099 Forms
There are many different types of 1099 forms that you may receive besides a 1099-MISC (for alternative income payments) in a tax year. For example:
- 1099-A: For acquisition or abandonment of secured property, meaning when a property has been transferred due to foreclosure.
- 1099-B: For income received via brokerage transactions and barter exchanges, such as from the sale of securities.
- 1099-C: For tax bills relating to canceled debt in amounts over $600.
- 1099-INT: For interest received on bank or credit union accounts in amounts over $10.
- 1099-DIV: For any dividends received from stocks in amounts over $10, or $600 if the company is being liquidated.
- 1099-R: For retirement benefits paid in sums over $10, such as via traditional retirement savings plans, insurance contract payments, survivor benefits, or profit-sharing and pension distribution payments.
How To Fill Out A 1099 Form
Happen to pay someone in the past year and need to report it for tax purposes? You’ll need to fill out a 1099-MISC. Note that the form isn’t for regular wages and earnings. Rather, it’s reserved for any person or business who did work for you in amounts totaling over $600 in a calendar year.
In order to get your 1099 forms filled out, you will need to collect W-9 tax forms from each party to have their taxpayer identification and other pertinent information on hand.
The form detailing any wages you paid in the previous calendar year must be submitted to the payee by January 31 and the IRS by February 28 if you file on paper and by April 1 if you file electronically. That’s why you’ll find that it’s a multi-part form:
- Submit copy A to the IRS and copy 1 to your state tax department.
- Send copy B and copy 2 to the payee, who will use them for filing federal and state tax returns.
- Keep copy C for your records.
The easiest way to submit 1099-MISC to the IRS is online, using the Filing Information Returns Electronically (FIRE) system. However, first you’ll need to file IRS Form 4419, which is your application to file electronically, at least 30 days before the due date of the 1099s to be approved to use the system.
Otherwise, you can mail in your 1099s, but if you choose this option, you also must submit a transmittal form 1096, which you’ll use to summarize all the tax forms you are submitting for each category. 1096s are not required if you e-file.
The Bottom Line On 1099 Tax Forms
A 1099 tax form is used by freelancers, independent contractors and everyday workers to report payments they receive from alternate sources besides a full-time employer. From earnings made on the sale of stocks or dividends earned to receipts from freelance work, 1099s are used by the IRS to keep track of non-wage income.
Note that you will only be filling one out yourself if you are an independent contractor or if you paid someone to do work for you and want to report it for tax purposes.
Looking to learn more about tax-saving strategies and how to make your money work harder for you? Check out the Rocket HQ℠ Personal Finances archives today.
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