Form 1099 FAQs

1099 FORM FAQs

The IRS requires any person or company who makes certain types of payments to report them on a 1099-MISC to the recipient and the IRS. This informational form covers a wide range of payments you receive, such as rent, royalties, prizes and awards and substitute payments in lieu of dividends. However, the more common use of the form is to report your earnings when you work as an independent contractor, such as a freelance writer.

A 1099-MISC form serves a similar purpose to an independent contractor as a W-2 does for to an employee. The form reports the total amount of payments you receive from a single person or entity during the year that you provide services to. It includes some of your personal information such as name, address and either Social Security number or employer identification number. Most importantly, it will classify each type of payment in separate boxes on the form depending on the reason for your payment. Generally, if you receive payment for contract work you do, then your annual earnings will appear as nonemployee compensation.

Depending on how many different companies or people you receive payments from during the year, you may receive more than one 1099-MISC. Each payer must complete the form if during any year it pays you $600 or more. However, if you earn $500 from 20 different companies, you still must report your income even though you might not receive a single 1099-MISC. In most cases, the payer must provide you with a copy of the form by January 31 of each year, as well as a copy to the IRS by the last day in February.

As an independent contractor or freelancer, you report all earnings on your income tax return just like an employee does, but you do it in a different way. If your freelance work is sporadic and generally not your main source of income, then you can just include the payments in “other income” on the first page of your tax return.

If you work as an independent contractor for substantial periods during the year, then the IRS will treat you as self-employed. Self-employed taxpayers must report 1099-MISC income on a Schedule C attachment to their tax return.

In addition, you are also liable for Social Security and Medicare taxes, which you calculate on Schedule SE and attach to your return.

There are some tax advantages to earning nonemployee income on a 1099-MISC. One benefit is that you have more freedom than an employee to claim deductions that relate to your profession.

For example, if it’s necessary to use a computer to complete your work, your eligibility to claim a deduction for it is less restrictive than other taxpayers who must be eligible to itemize their deductions to do so. Furthermore, since you are not subject to withholding, you must make estimated tax payments throughout the year. But since you can calculate precisely what you owe, you can insure that you don’t pay too much in federal income tax during the year. You can use TurboTax to do the calculations for you, or get a copy of the worksheet accompanying Form 1040-ES and work your way through it.

Payers use Form 1099 – MISC, Miscellaneous Income, to:

  • Report payments made in the course of a trade or business to a person who's not an employee or to an unincorporated business.
  • Report payments of $10 or more in gross royalties or $600 or more in rents or compensation. Report payment information to the IRS and the person or business that received the payment.

The basic rule is that you must file a 1099-MISC whenever you pay an unincorporated independent contractor — that is, an independent contractor who is a sole proprietor or member of a partnership or LLC — $600 or more in a year for work done in the course of your trade or business.

Send Copy B of the 1099-MISC form to the recipient by January 31st . File Copy A of form 1099-MISC with the IRS by January 31st .

Form 1099-INT is an annual tax statement provided by payers of interest income, such as banks and savings institutions, that summarizes your interest income for the tax year. Interest reported on Form 1099-INT includes interest paid on savings accounts, interest-bearing checking accounts, and US Savings bonds.

This is based on IRS Regulations. If you were qualified to receive Form 1099-INT via the US Postal Service then you will be qualified to receive Form 1099-INT online. Qualifications include documented US Persons with interest income of at least $10.00.

Send Copy B of the 1099 INT form to the recipient by January 31st. File Copy A of form 1099-INT with the IRS by February 28th. If you are required to file 1099 INT forms electronically, the due date is March 31st.

  • Box 1 of the 1099-INT reports all taxable interest you receive, such as your earnings from a savings account.
  • Box 2 reports interest penalties you’re charged for withdrawing money from an account before the maturity date.
  • Box 3 reports interest earned on U.S. savings bonds or Treasury notes, bills or bonds. However, some of this may be tax-exempt.
  • Box 4 reports any federal tax withheld on your interest income by the payer.
  • Box 8 relates to interest-bearing investments you hold with state and local governments, such as municipal bonds.

Form 1099-B is a form issued by a broker or barter exchanged that summarises the proceeds of all stock transactions. The sale of stock is accompanied by a gain or loss, which must be reported to the IRS when you file your taxes.

The 1099-B helps you deal with capital gains taxes. Usually, when you sell something for more than it cost you to acquire it, the profit is a capital gain, and it may be taxable. On the other hand, if you sell something for less than you paid for it, then you may have a capital loss, which you might be able to use to reduce your taxable capital gains or other income.

You pay capital gains taxes with your income tax return, using Schedule D, and the data from Form 1099-B helps you fill out Schedule D.

Box 2 of the 1099-B form tells whether the gain or loss involved is short-term or long-term. If you owned an asset, such as stock, for a year or less before selling it, any gain or loss from a sale is short-term.

If you owned it for more than a year, you have a long-term gain. The distinction is extremely important, since tax rates on long-term gains are generally significantly lower than those on short-term gains.

Cancellation of Debt
File form for each debtor whom you cancelled $600 or more of a debt owed to you if: - you are an applicable financial entity and,
- an identifiable event has occurred.

File this form for shareholders of a corporation if control of the corporation was acquired or it underwent a substantial change in capital structure. This form is furnished to shareholders who receive cash, stock or other property from an acquisition of control or a substantial change in capital structure.

Cooperatives file this form for each person:

  • To whom are they paid at least $10 in patronage dividends and other distributions described in section 6044 (b) or:
  • From whom they withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

This form is used by banks and other financial institutions to report dividends and other distributions to tax payers and to the IRS.

Acquisition or Abandonment of Secured Property
File this form for each borrower if you lend money in connection with your trade or business and, in full or partial satisfaction of the debt, you acquire an interest in property that is security for the debt, or you have reason to know that the property has been abandoned. You need not be in the business of lending money to be subject to this reporting requirement.

Federal, state, or local governments file this form if they made payments of:

  • Unemployment compensation;
  • State or local income tax refunds, credits or offsets;
  • Reemployment trade adjustment assurance (RTAA) payments;
  • Taxable grants; or
  • Agricultural payments

They also file this if they received payments on a Commodity Credit Corporation (CCC) loan.

File this form to report distributions made from a:

  • Health savings account (HSA);
  • Archer Medical Savings Account (Archer MSA); or
  • Medical Advantage Medical Savings Account (MA MSA)

The distribution may have been paid directly to a medical service provider or the account holder. A separate return must be filed for each plan type.