The 1099 form is an IRS tax form used to report income earned from sources other than wages, salaries, or tips. It is issued by businesses, financial institutions, or other entities that pay a taxpayer more than $600 during the tax year. Taxpayers must report the income listed on their 1099 forms when filing their federal income tax returns.
There are several types of 1099 forms, each used to report different types of income:
- 1099-MISC: Used to report miscellaneous income, such as freelance work, rent, or legal services.
- 1099-INT: Reports interest income earned from savings accounts, CDs, or bonds.
- 1099-DIV: Reports dividend income from stocks or mutual funds.
- 1099-NEC: Used to report non-employee compensation, such as payments to independent contractors.
- 1099-R: Reports distributions from retirement accounts, pensions, or annuities.
If a taxpayer receives a 1099 form, the IRS also receives a copy, meaning the income must be reported on the taxpayer’s return to avoid penalties for underreporting. Failing to report 1099 income can result in fines, penalties, and interest on unpaid taxes.
Taxpayers who receive multiple 1099 forms should keep careful records and ensure that all income is reported accurately. Consulting with a tax professional can help ensure proper filing and compliance.