What is a 1099 Tax Form? (Guide to IRS Form 1099)

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Each year as tax season rolls around, it’s time to gather all of your important documents relating to your income and other earnings to report them to Uncle Sam. Most American taxpayers receive some form of information return. An information return is used by third-party entities, such as businesses and corporations, to document taxable payments made throughout the year. These taxable payments include the salaries and wages you earn.

When it comes to information returns, there are two common types taxpayers receive: IRS Form W-2 and IRS Form 1099. IRS Form W-2 is an information tax form that documents an employee’s annual wages and the amount of taxes that were withheld from their paycheck. Employers will send their salaried or hourly employees a W-2 form by January 31st of each year.

On the other hand, the 1099 Form is a collection of forms that report various types of income, other than salaried or hourly earnings. Today, we will discuss the 1099 tax forms to ensure you what to do with them and how to use them when filling out your personal tax return.

What is a 1099 Form?

If you’re asking yourself, “What is a 1099?” you’re not alone. Each year, businesses, corporations, and other entities across the country are required to send out 1099 forms to certain employees. However, 1099 forms don’t go to employees who earn wages or a salary. Instead, 1099-MISC tax forms are typically sent to independent contractors who provide a service and receive more than $600 in income. Examples of independent contractors include freelance writers, contracted construction workers, artists, and other workers who performed contracted work. As the gig economy grows, the number of freelancers in the United States has increased exponentially.

Not a freelancer? You may receive you may receive a 1099 form for a variety of other reasons. For example, IRS.gov requires employers and organizations to send out 1099-MISC Forms to people they’ve paid:

 

  • A minimum of $10 U.S. dollars in broker payments or royalties instead of in tax-exempt interest or dividends
  • At least $5,000 in direct sales of consumer products to a buyer who plans to resell anywhere other than a retail establishment
  • A minimum of $600 U.S. dollars in:
    • Awards or prizes
    • Attorney payments
    • Proceeds to fishing boats
    • Cash payments for aquatic life you purchased from those engaged in the business of fishing
    • Health and medical care payments
    • Rents
    • Services completed by someone who is not your employee (e.g., contractor)
    • Other income payments
    • Proceeds to crop insurance
    • Money that was paid from a notional principal contract to a partnership, individual, or estate

While IRS Form 1099-MISC is one of the more common 1099 Forms, there is a total of 20 1099 tax forms you should be aware of. These information returns are used to complete individual tax returns. Completing an accurate tax return with information from your 1099 tax forms is important. One reason is because if you’re looking for a loan, lenders will ask for verified income, which can be proven through an accurate tax return. Another reason is to avoid getting audited by the IRS for fraudulent activity.

Below, we’ll go over each IRS Form 1099, so you know what to do in case you receive one.

1099-A: Acquisition or Abandonment of Secured Property

If you purchase a home and borrow money from a lender, such as in the form of a mortgage, and you transfer the ownership of your home back to the lender (e.g., a foreclosure), the lender will send you IRS Form 1099-A. You may also receive IRS Form 1099-A if you abandon the property as well. IRS Form 1099-A allows the lender to report the fair market value of the secured property and how much debt you owe. You will use IRS Form 1099-A to report any capital gains or losses on Schedule D of IRS Form 1040.

1099-B: Proceeds From Broker and Barter Exchange Transactions

IRS Form 1099-B is used for two scenarios: gains or losses made through the sale of securities like stocks, bonds, and derivatives, in addition to barter exchange transactions such as trading services or property in lieu of payment. If either of these cases applies, you can expect to receive IRS Form 1099-B in the mail from your stockbroker or the company/individual that you made an exchange with. You will use IRS Form 1099-B to report any capital gains or losses on Schedule D of IRS Form 1040, or on IRS Form 8949.

1099-C: Cancellation of Debt

Unfortunately, if a lender cancels debt you owe, the IRS views it as taxable income. If you’ve negotiated a deal with a lender to cancel some or all of the debt you owe, they will send you IRS Form 1099-C, which could result in a hefty tax bill. Cancellation of debt may also result in a capital gain, which should be reported on Schedule D of IRS Form 1040.

1099-CAP: Changes in Corporate Control and Capital Structure

If you own stock in a corporation that has undergone a change in capital structure or corporate control, you will receive IRS Form 1099-CAP. This 1099 Form will let you know whether you made any capital gains or losses as a result of the change, which can be recorded on Schedule D of IRS Form 1040.

1099-DIV: Dividends and Distributions

There are a few reasons why you may be receiving IRS Form 1099-DIV in the mail. One reason could be that the stocks you own pay dividends to shareholders. Another reason could be that any investments you have, such as in a mutual fund, made capital gain distributions to you throughout the year. If you receive IRS Form 1099-DIV, you will use that information to complete Schedule B of IRS Form 1040, if necessary.

1099-G: Certain Government Payments

If you received IRS Form 1099-G, that means you received certain payments from the government. These payments typically include:

  • Taxable grants
  • Unemployment compensation
  • Agricultural payments
  • Re-employment trade adjustment assistance payments
  • State or local income tax credits, offsets, or refunds

You will use the information provided on IRS Form 1099-G to complete your income tax return (IRS Form 1040).

1099-H: Health Coverage Tax Credit (HCTC) Advance Payments

If you qualified for the Health Coverage Tax Credit (HCTC) and received payments to help with the cost of your health insurance premiums, you may receive IRS Form 1099-H. You will also use this 1099 Form to fill out your personal income tax return.

1099-INT: Interest Income

If a bank, a financial institution, a government agency, or any other entity pays you 10 U.S. dollars or more in interest during the year, you will receive IRS Form 1099-INT. When you receive this 1099 Form, you will have to report the amount of interest you received from each payer on Schedule B of IRS Form 1040.

1099-K: Payment Card and Third Party Network Transactions

IRS Form 1099-K is an information return that is usually sent to business owners who received payments from payment cards (debit cards, credit cards, etc.) or third party networks (Venmo, PayPal, etc.). If you are self-employed, you will use the information reported on IRS Form 1099-K to complete Schedule C of IRS Form 1040. Or, if you’re a farmer, you will report your IRS Form 1099-K payments on Schedule F of IRS Form 1040.

1099-LS: Reportable Life Insurance Sale

If you received life insurance payments, you will receive IRS Form 1099-LS from the acquirer of the life insurance contract. Acquirers of life insurance contracts are responsible for filing separate IRS 1099-LS Forms for each payment recipient.

1099-LTC: Long-Term Care and Accelerated Death Benefits

If you receive long-term care insurance benefits, the insurance company that provides these benefits will send you IRS Form 1099-LTC. You will use this form to complete your individual tax return, and you may also have to use this 1099 tax form to complete IRS Form 8853.

1099-MISC: Miscellaneous Income

As previously stated, IRS Form 1099-MISC is one of the most common 1099 tax forms. You will receive IRS Form 1099-MISC if you received any form of income other than your salary or wages, and will use the information on this return to complete your individual tax return. Your individual tax return can act as a proof of income, which is why using accurate information from your 1099 forms is required.

1099-OID: Original Issue Discount

If you receive a bond, treasury note, or other financial instruments from a company or entity at a discounted rate, the original issue discount is taxable over the course of the bond, note, or financial instrument. You will receive IRS Form 1099-OID from the bond issuer at maturity.

1099-PATR: Taxable Distributions Received From Cooperatives

If you’re part of a cooperative and received a minimum of 10 U.S. dollars in patronage dividends, the co-op will send you IRS Form 1099-PATR. You will use this form to complete your individual tax return.

1099-Q: Payments From Qualified Education Programs (Under Sections 529 and 530)

If you created a 529 Account or Coverdell Education Savings Account to help pay for qualifying educational programs or expenses, you will receive IRS Form 1099-Q when you begin to withdraw money from these funds. If you are the beneficiary of one of these accounts, it’s important to know that contributions can grow tax-free, meaning you will not have to report this income on your tax return. However, any money that is used on non-qualified expenses will have to be reported as income.

1099-QA and 5498-QA: Distributions From ABLE Accounts

If you or a loved one with special needs has an ABLE Account, the state, or a state agency or instrumentality, will send you IRS Form 1099-QA to report ABLE Account distributions, and will also file IRS Form 5498-QA to report ABLE Account contributions.

1099-R and 5498: Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

If you received IRS Form 1099-R, that means you received a distribution of 10 U.S. dollars or more from your pension, retirement plan, individual retirement arrangement (IRA), annuities, or other retirement plans. Because most retirement plans are tax-advantaged, this 1099 form will most likely be sent for record-keeping. However, if you withdraw an early distribution, it may be subject to tax, which will be reported on this 1099 tax form.

1099-S: Proceeds From Real Estate Transactions

If anyone exchanged or sold any real estate, you will receive IRS Form 1099-S from them. IRS Form 1099-S will allow you to document any capital gains or losses on your investment property, which can be recorded on Schedule D of IRS Form 1040.

1099-SA and 5498-SA: Distributions From an HSA, Archer MSA, or Medicare Advantage MSA

If you received any distributions from a health savings account (HSA), Medicare Advantage Medical Savings Account (MA MSA), or Archer Medical Savings Account (Archer MSA), expect to see IRS Form 1099-SA in the mail. This tax form reports all distributions made from the account, while IRS Form 5498-SA reports any contributions. Because these distributions are not taxable if the money is used for qualified expenses, you will not need these forms for your individual tax return.

1099-SB: Seller’s Investment in Life Insurance Contract

Insurance companies will use IRS Form 1099-SB to report a transfer of a life insurance contract. If you are an acquirer and either transferred a life insurance contract to a foreign person or transferred a life insurance contract to another individual, you will receive IRS Form 1099-SB from the life insurance issuer.

Key Takeaways on 1099 Tax Forms

As you can see, there are many 1099 tax forms that you may receive in the mail. While some are more common than others, knowing what each one means and how to use them is important. As tax season rolls around, make sure the 1099 forms you receive are filled out with up-to-date information to ensure an accurate tax return.

 

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