Industry:Accounting, Payroll and Taxation Added By:Admin Posted On:Nov. 20, 2019
If you earn income in the U.S. outside a regular paycheck, you will likely receive a Form 1099. The IRS uses these forms to track income from sources other than your employer, and it has changed them several times over the years. This article explains the main types of Form 1099 and how each one affects your tax return.
Form 1099 is a family of information returns. A business, bank or government agency that pays you sends a copy to you and to the IRS. You then report that income on your tax return, alongside any wages from an employer.
Permanent employees receive Form W-2 from their employer instead, which shows the wages paid and taxes withheld for the year.
If a business pays you as an independent contractor, it reports that pay to the IRS. Before tax year 2020, this nonemployee compensation went on Form 1099-MISC. Starting with tax year 2020, it is reported on Form 1099-NEC, while Form 1099-MISC covers other payments such as rents and royalties.
For many years the reporting threshold was $600 per payer per year. For payments made after December 31, 2025, the threshold for Form 1099-NEC is $2,000. Each business that pays you above the threshold should send its own form, and you must report all of this income whether or not you receive a form.
If you own stocks or mutual funds and receive dividends, you will get Form 1099-DIV. Other investments, such as bank deposits or bonds, pay interest instead of dividends. That interest is taxable and is reported on Form 1099-INT, usually sent by the bank or institution that paid it.
Withdrawals from a retirement account can be taxable. You will receive Form 1099-R after the end of the year, showing the total you withdrew. It covers distributions from pensions, annuities, profit-sharing plans, retirement plans and IRAs.
If a local, state or federal government agency pays you, the payment is reported on Form 1099-G. This includes unemployment compensation received while you were out of work. You must include the full amount shown on Form 1099-G in your taxable income.
Canceled debt can be taxable. If a lender forgives part of what you owe, Form 1099-C reports the canceled amount, and you generally owe tax on it. However, if you can show you were insolvent when the debt was canceled, you may be able to exclude it from income.
Every Form 1099 carries your Social Security number or taxpayer identification number. That lets the IRS match the income reported by payers against your return, and it will know if you leave any of it out. Keep up with changes to Form 1099 rules and file on time to avoid problems later.