Everything You Need to Know About 1099 Forms

by
Erin A F McCloskey, EA, CFP®, MBA, CLTC
Updated 
September 21, 2022
February 24, 2022
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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

If you're a self-employed person, freelancer, or independent contractor who earned at least $600 from a client or platform, expect them to send you a 1099. (The deadline to mail it out is January 31, but it may show up a few days later, in early February.)

Keep track of these forms! You'll need them to file (or e-file) your income taxes.

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 Tax 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.

This form is actually pretty new. 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 next!

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, and prize winnings.

To find out more, check out our post on the differences between 1099-NEC and 1099-MISC.

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Form 1099-K

Next to the 1099-NEC (and 1099-MISC of yore), this is probably the most important 1099 for independent contractors.

The IRS uses it for "Payment Card and Third Party Network Transactions." In practice, it’s for people who used a service to handle credit card (or debit card) transactions.

If you accepted credit card payments on your online store, from your small business clients, or even from your rideshare passengers, chances are good that you'll get one of these. Issuing parties include credit card companies, like Visa, but also third-party processors like PayPal, Stripe, Square, Venmo, Cash App, and more.

Prior to 2022, apps like PayPal were only required to send you a 1099-K if you received at least $20,000, over more than 200 transactions, through their platform. But starting in January of 2022, they're required to send you one as long as you got more than $600. (This won't affect your tax reporting until 2023, though.)

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

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. You could also use Keeper Tax's own tax filing software, which is designed specifically for 1099 workers!

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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

If you receive a 1099 tax form, be sure to refer to it when you're filing your taxes. 

Why? Because the same form you received was also sent directly to the IRS. Needless to say, underreporting your 1099 income puts you at risk of an audit.

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 wanting 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

If you moved in the last year, your contact information might be out of date, and they might have just sent it to the wrong place.

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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