Everything You Need to Know About 1099 Forms

by
Erin A F McCloskey, EA, CFP®, MBA, CLTC
Updated 
February 2, 2023
February 2, 2023
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Reviewed by
Everything You Need to Know About 1099 Forms
by
Erin A F McCloskey, EA, CFP®, MBA, CLTC
Updated 
February 2, 2023
February 2, 2023
Icon check
Reviewed by

Ever wondered what a 1099 is? If you're a freelancer or independent contractor, you should be getting one of these tax forms from every client or platform that paid you at least $600 this year. 

In this article, we'll break down what exactly this tax form is — including the different types of 1099 forms. We'll also go over what to do with them when you file your self-employment taxes.

Contents

What is a 1099 form?

A 1099 form is a type of "information return," which means it informs the IRS about taxable payments. At the end of the day, it's a record that you were paid by a person or company that isn't your employer.

The most common type of 1099 form — Form 1099-NEC — goes out to self-employed people, like independent contractors, gig workers, and small business owners. These forms show income earned from work like driving for DoorDash, freelancing on Upwork, and renting a room out on Airbnb.

Other types of 1099s report different sources of non-wage income, from unemployment to real estate transactions. More on that later!

1099 forms vs. W-2 forms

Form 1099 is different from form W-2, which is used to report wages, salaries, or tips from an employer. If you get a 1099 from a company, it's a sign that you aren't considered their employee.

Of course, it’s possible to get both a 1099 and a W-2 in the same year. They just generally won’t be from the same source.

Who gets a 1099 form?

You'll get a form if you're self-employed person, freelancer, or independent contractor who:

  • Earned at least $600 from a client or platform who wrote you a check or paid through direct deposit
  • Made at least $20,000 and logged at least 200 transactions through credit, debit, or payment app.

The deadline to mail it out is January 31, but it may show up a few days later, in early February.

What 1099 forms mean for your taxes

There's no hiding what's on your 1099. When you get your form, you'll notice it shows your Taxpayer Identification Number (or your Social Security number). That means the IRS knows you got that money — and you'll be expected to report it.

There is one piece of good news: you won't necessarily owe taxes on all the money reported on your 1099s. That income doesn't include your write-offs, which will reduce your taxable income and lower your tax bill. That's why it's so important to track everything you're spending on your work, from your car expenses to your computer.

Afraid of missing write-offs? Give Keeper a try. Our app scans your purchases for business expenses and writes them off for you, so you can spend less time updating spreadsheets and scanning receipts.

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Types of 1099 forms

There are several different types of 1099 forms, reflecting the different types of income you can get from a non-employer. 

Here's a rundown of 1099s, starting with the most important one for freelancers — 1099-NEC.

Form 1099-NEC

1099-NEC forms report money paid to a non-employee for their services. (The "NEC" stands for "Nonemployee Compensation”.) If you did any independent contract work, or ran a small business, you'll get one of these from your clients and customers.

You'll get one of these if someone pays you more than $600 for your contract work. If you have multiple clients, expect several 1099-NECs.

Note: Before 2020, payments made to contractors and freelancers were reported on 1099-MISC instead. That form still exists, but it's now used for different kinds of non-wage income. (More on that later.) To find out more about this change, check out our post on the differences between 1099-NEC and 1099-MISC.

Form 1099-K

Next to the 1099-NEC, this is the most important type of 1099 for independent contractors. The IRS uses it for "Payment Card and Third Party Network Transactions", which include:

  • Credit cards
  • Debit cards
  • Payment apps like Venmo and PayPal (though not Zelle)

Bottom line: If you accepted credit card payments on your online store, from your small business clients, or even from your rideshare passengers, you might get one of these — but only if you:

  • Earn at least $20,000 in work-related payments
  • Log at least 200 separate business transactions

The IRS originally planned to lower the  threshold to $600 and eliminate "200 transactions" requirement starting in 2022. (That would make the 1099-K rules match the 1099-NEC rules.) But ultimately, it decided to delay this change till 2023.

For more information on this form, check out our guide to the 1099-K.

If you'd like to learn more about how to use your form on your taxes, skip ahead to the section on reporting your 1099 income. Otherwise, keep reading to learn more about the other types of 1099s.

Form 1099-MISC

Since the IRS added the 1099-NEC to its repertoire of forms, this is no longer the most important one for people working on a contract basis.

These days, the 1099-MISC does exactly what it sounds like: it covers miscellaneous income. It's a catch-all for payments that don't fit easily into other categories, including:

  • Rental income
  • Royalties
  • Prize winnings

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Form 1099-A

The 1099-A form is used for mortgage-related payments. For instance, it might be sent to you if your mortgage lender cancels or forgives part of your debt. (It might also come into play if you have a short sale on your home.)

Canceled debt might not be "earned" the way a payment from Upwork is, but the IRS still thinks of it as income. That's why you'll still need to report it — and be ready to pay taxes on it.

Form 1099-B

If you get a 1099-B, it will probably come from a brokerage or barter exchange. They use this type of form to record their customers' capital gains and losses.

If you sold securities like stocks and options, you might get one of these. If so, expect it to show the gain — or loss — you made on each investment, as well as the dates you bought and sold them.

Form 1099-C

The C here stands for "Cancellation of Debt." If you settled your debt with a credit card issuer (or another lender) for less than you owe, you might end up getting a 1099-C. 

Form 1099-CAP

This form is sent out to shareholders when a corporation either undergoes a big change in capital structure, or gets acquired.

The income that's being reported is any cash, stock, or other property received as a result of these changes.

Form 1099-DIV

You'll get a 1099-DIV if you're paid more than $10 in dividends from investments. Dividends on your account at a credit union, though, don't count. (They’re technically reported as interest instead.)

Form 1099-G

Form 1099-G reports payments from the government, whether it comes from the local, state, or federal level. If you received unemployment benefits in the previous year, you'll likely get one.

Other types of payments also count, including tax credits, grants, and PhD stipends from public universities.

Form 1099-INT

This type of 1099 reports interest income. Expect one if you earned more than $10 in interest from a financial institution, like a brokerage, mutual fund, or bank.

Form 1099-LTC

"LTC" stands for “Long-Term Care," but this type of 1099 also covers accelerated death benefits. Insurance companies, government agencies, and viatical settlement providers send these out to their payees.

Form 1099-OID

The "OID" here means "Original Issue Discount." This type of 1099 form is given to investors whose bonds have matured, assuming they were originally issued at a discount from their value at maturity.

Here's an example. Say you paid $850 for a bond with a $900 face value. Once it matures, you'll get the full $900 — meaning you essentially got it at a $50 discount.

If this situation applies to you, you'll get a 1099-OID from the original issuer of your discounted bond.

Form 1099-PATR

If you're member of a co-op who received at least $10 in patronage dividends, expect a 1099-PATR

Form 1099-Q

The 1099-Q form reports money that you, your child, or your child's school received from a qualified tuition plan, like 529 plan or Coverdell ESA. Anytime you make withdrawals to pay for school, you'll likely get one of these forms.

If you do get a 1099-Q, don't panic. When you use those funds for qualified education expenses, they aren't actually subject to tax. All you'll need to do is keep your 1099-Q form for your records.

Form 1099-R

You'll get one of these forms when you get distributions from a retirement plan or profit-sharing plan, including an IRA, pension, or annuity. It's possible to get one of these even if you're not yet retired — for instance, if you took out a loan from your 401(k) and didn't repay it.

Keep in mind: The amount reported on this form isn't always taxable. (A direct rollover from a 401(k) plan to an IRA, for example, won't be taxed.) 

Form 1099-S

This type of 1099 records "Proceeds from Real Estate Transactions." If you sold your home, a commercial property, or even a plot of land, you'll have to file one of these.

This form exists to make sure sellers report all their capital gains. But of course, the taxes you pay on real estate transactions can get pretty complicated. If it was your primary residence that you sold, for example, you won't have to pay capital gains taxes on the first $250,000 you made on the sale.

Form 1099-SA

You'll get a 1099-SA if you've taken any distributions from your HSA, or health savings account. Luckily, these won't be taxable if you've used them to pay for qualified health expenses.

How to report your 1099 income

No matter what type of 1099 income you have coming in, you'll almost always need to report it when you file your taxes.

If you file your own tax return using software, you'll be asked if you have any 1099 income. Just put in the information from the forms you were sent. To make things easier, use Keeper's own tax filing software, which is designed specifically for 1099 workers. Upload your form in a few seconds, and get your taxes out of the way.

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If you're paying someone to do your taxes, you'll have to provide them with all your 1099 forms.

What not to do with your 1099 form

When you file your taxes, don't report gross income that's less than the total on all your 1099s.

Why? Because the same form you received was also sent directly to the IRS. So they know you earned at least that amount. Report any less, and you might be at risk of an audit.

If there are issues with your 1099 that make your income look higher than it actually was, you still shouldn't ignore the numbers on your form. Luckily, there are ways to deal with these problems when you file.

What to do if your 1099 income is too high

If your 1099 includes money that you didn't actually earn, don't worry — you can adjust for that when you file your taxes. You'll essentially:

  1. Include all the income on your 1099s when reporting your gross earnings (even the money you didn't actually earn)
  2. Cancel out the extra income elsewhere on your tax return

How you handle step #2 will depend on how the extra income ended up on your 1099 in the first place.

If your client accidentally included reimbursements on your 1099

Sometimes, clients will offer to reimburse you for on-the-job expenses. For example, pretend you're a freelance travel writer reviewing a new resort. You might pay for your stay out of pocket, then have the magazine pay you back.

That money shouldn't be taxable for you — but the magazine might include it on her 1099-NEC by mistake.

In this situation, you should:

  1. Report all the money on your 1099-NEC as income, including the hotel reimbursements
  2. Claim the hotel fees as a business write-off

This cancels out the extra money on your 1099-NEC. And it won't raise any eyebrows at the IRS, because your reported income will still match what's on your 1099.

If a payment processor accidentally includes personal transactions on your 1099-K

PayPal, Venmo, and other apps are only supposed to include business transactions on your 1099-K. But mistakes happen. Say your roommate Venmos you his share of the rent before you pass it on the landlord, and that payment gets reported on your 1099-K.

In this situation, you should:

  1. Report the mistakenly included personal transaction on line 8z of your Schedule 1 ("Other Income")
  2. Add the same amount on line 24z ("Other Adjustments"), which will subtract this from your taxable income

Again, this cancels the extra money you shouldn't be taxed on without reporting a gross income that's less than what your 1099s indicate.

What to do if you don't get a 1099

Say you earned more than $600, but you still weren’t sent a 1099 form. Unfortunately, that doesn't mean you can just ignore that income. Skip reporting it to the IRS, and you're technically committing tax fraud. That can get you in serious trouble.

If you haven't gotten your forms by early February, go through the following checklist:

✓ Make sure you earned at least $600

If it turns out that you made less than $600 from the platform or client you were waiting on, you should still report that income to the IRS. It’s just like reporting cash income.

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✓ Check your email spam folder

Sometimes, 1099 forms get sent digitally. This is an easy place for them to wind up.

✓ Verify that your address is correct

Moved in the last year? Your contact information might be out of date, and they might have just sent it to the wrong place.

✓ Go ahead and file without your 1099

If you know you should have a 1099, but find yourself empty-handed, know that you won't get in trouble. In fact, a missing 1099 doesn't even have to delay your filing.

Go ahead and report your income using other records, including your:

  • Invoices
  • Bank statements
  • Sales receipts

You don't have to let someone else's slip-up ruin your tax season.

Erin A F McCloskey, EA, CFP®, MBA, CLTC

Erin A F McCloskey, EA, CFP®, MBA, CLTC

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Erin is a financial planner and tax preparer. She loves to optimize everything, plan travel and win at board games.

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