If you expect to receive income outside of what you’ve earned as an employee – a freelance gig, unemployment, interest, and dividends, or retirement account distributions, to name a few possibilities – you should anticipate a 1099 form in your mailbox or inbox before tax time.
But even among tax forms, 1099 forms can be a bit confusing. As of 2022, there are more than 10 different types of 1099s, each distributed for a slightly different reason.1 Here’s what you need to know about 1099s, plus an explanation of some of the most common types.
What is a 1099 Tax Form Used For?
According to the Internal Revenue Service, the 1099 is a type of “information return.” A 1099 is used to report any type of income you receive throughout the year other than the salary or wages paid by your employer. Salary and wages appear on a W-2 form, which is given to employees to report to the IRS their income and payroll taxes withheld throughout the tax year. Just as you receive a W-2 from your employer, whomever pays you income – other than your employer – is responsible for sending the appropriately filled out 1099(s) to you and the IRS, usually before the end of January. You’ll need each 1099 to accurately file your tax return.
You can expect to receive a 1099 for a wide variety of reasons, from common sources of income like contract freelance work, unemployment benefits, and interest and dividends, to more niche income sources like crop insurance proceeds, timber royalties, and sweepstakes winnings.
Given the many ways you can earn non-employer income, it’s common for some people to receive more than one 1099. For example, if you collected unemployment benefits from your state for part of the year, sold some stock, then started freelancing, you should receive a 1099-G from the state government, a 1099-B from your brokerage firm, and a 1099-NEC from the company or companies you’ve contracted with. NEC stands for nonemployee compensation.
1099 Tax Forms
All 1099 tax forms are used to report income from sources other than a traditional employer. However, each type of 1099 form is used to report different types of income. Here are some of the most common 1099 forms and what they’re used for:1
- 1099-INT, for Interest Income
The 1099-INT form is used to report any income you received from interest payments, such as from a high yield savings account. This form is filed by the financial institution paying you and is in most cases required if you get paid more than $10 in interest.
- 1099-R, for Distributions from Retirement Accounts
The 1099-R form is used to report distributions of $10 or more from retirement accounts, such as an IRA or 401(k), a pension plan, a profit-sharing plan, annuities, or insurance payouts.
- 1099-DIV, for Dividends and Distributions
The 1099-DIV form is used to report dividends and capital gain distributions from stocks and mutual funds. This form is required if you receive over $10 in distributions or over $600 from liquidations.
- 1099-NEC, for Nonemployee Compensation
You’ll receive a 1099-NEC if you’ve received $600 or more in income for being an independent contractor. This typically includes any kind of freelancing or side hustle. Before the 2020 tax year, this type of income was reported with the 1099-MISC form, explained below. If you work or contract with multiple companies, you’ll receive a separate 1099-NEC from each.
- 1099-MISC, for Miscellaneous Information
The 1099-MISC form is used to report many different types of income, the most common of which are rents and royalties. Rents include income from real-estate rental properties or renting out personal property. Royalties include income received for the ongoing use of your assets, like copyrighted works, or from natural resources extracted from your property. The minimum amount required for the payer to issue a 1099-MISC depends on the type of income being reported. For example, you should receive a 1099-MISC if you’ve made at least $10 in royalties or at least $600 in rents.
- 1099-G, for Certain Government Payments
The 1099-G form reports certain payments received from the government, most notably unemployment compensation. Other types of income reported with the 1099-G form include taxable grants, agricultural payments, reemployment trade adjustment (RTAA) payments, and state or local income tax refunds, credits, or offsets.
- 1099-B, for Proceeds from Broker and Barter Exchange Transactions
The 1099-B form is filed by a broker or mutual fund when you sell stocks and other similar assets like commodities, futures contracts, and barter exchange transactions. All amounts received must be reported.
What to Do When You Get Your 1099 Form(s)
In most cases, whoever is paying you must fill out the appropriate 1099 form and mail it to both you and the IRS, usually by January 31 following the tax year in which the payment was made (e.g. January 2022 for payments made in 2021). You’ll typically receive your 1099(s) sometime in February, at the latest. However, different types of 1099 forms may have different filing dates, so you may not receive all at the same time.
Your 1099 will usually include information such as:
- Your name, address, and taxpayer ID or Social Security number.
- The name, address, and taxpayer ID of the company or individual who issued the form.
- The amount of income paid to you.
- The amount of federal or state income tax withheld, if any.
When you receive your 1099 forms, make sure all information is correct – this includes double checking that all reported income matches your personal records. If there’s an error on your 1099, be sure to report it to the issuer immediately. If everything is correct, you’ll report the income on your tax return.
Remember that the IRS receives a copy of each 1099 you receive. If your tax return is missing any of the income included on your 1099s, the IRS will likely contact you to explain the discrepancy or pay additional income taxes, if necessary.
What’s the Difference Between a 1099 and 1098?
While a 1099 reports the amount of non-wage payments you received, a 1098 form is used to report the amount of money you paid someone else. In particular, 1098 forms are used to report expenses like student loan interest payments, tuition and scholarship information, mortgage interest payments, and contributions of vehicles, boats, or planes. The information on any 1098 forms you receive may be used for certain tax deductions.