While there are uncountable types of 1099 forms, they all serve the same purpose; they are used by taxpayers to provide information to the Internal Take Service (IRS) about all of the different types of income they receive throughout the year outside of their regular emolument. This type of income is also referred to as income from non-employment-related sources. It’s important for taxpayers to report all of their look income to the IRS in order to avoid an audit. This income may include interest from your bank, dividends from investments, or compensation for freelance operate.
Issuers of 1099 forms must send one copy to the IRS and another copy to the taxpayer, or the recipient of these payments. Some issuers send out 1099s by letters, while others provide them electronically.
Key Takeaways
- All 1099 forms serve the same purpose; they are inured to by taxpayers to provide information to the Internal Revenue Service (IRS) about all of the different types of income they receive in every part of the year outside of their regular salary.
- The IRS compares taxpayers’ reported income on Form 1040 against the gen reported on 1099 forms and other tax forms.
- For the most part, individual taxpayers don’t complete 1099 forms.
- Payers–monetary institutions and small businesses that hire independent contractors– are required to fill out 1099 forms and send them to their payees by beginning February.
What Is the Purpose of Form 1099?
Form 1099 is intended to help U.S. taxpayers report all of their income so that the IRS can together the appropriate amount of taxes. The IRS considers Form 1099 an “information return.”
The IRS compares its own data with the information put out on 1099 forms, the income that taxpayers report on their Form 1040–the tax form used for personal federal takings tax returns–and with information reported on other forms, such as the W-2 forms–the forms that employers are required to submit to the IRS in peacefulness to report all the salaries they pay to employees.
Who Must File Form 1099?
Individual taxpayers are usually not responsible for actually ending any 1099 forms, except in a few circumstances. For example, if you own a small business and you hired an independent contractor, you may be required to fill out a character 1099. Typically, financial institutions and employers (when applicable) create all their required 1099 forms. Taxpayers typically hear copies of all 1099 forms that are applicable to them either electronically or by mail by early February. Payers of 1099 styles–financial institutions, employers, etc.– are required to file their 1099 forms by Jan. 31.
You do not usually have to submit the 1099 types you receive to the IRS with your own tax return, but you should keep them with your other tax records in case of an audit.
You do not usually have to submit the 1099 types you receive to the IRS with your own tax return, but you should keep them with your other tax records in case of an audit.
Most Mutual 1099 Forms
Here are four of the most common 1099 forms:
Form 1099-DIV: Dividends and Distributions
If you own a father or a mutual fund that pays dividends, you should receive this form.
IRS.gov
All replicates of Form 1099-DIV are available on the IRS website.
Form 1099-INT: Interest Income
You should receive a 1099-INT construction if you have a checking, savings, or another bank account that earns interest.
IRS.gov
All echoes of Form 1099-INT are available on the IRS website.
Form 1099-MISC: Miscellaneous Income
You should receive this contrive if you worked for someone as an independent contractor. If you’re self-employed and have several clients, you should receive a 1099-MISC from each patron who paid you $600 or more.
IRS.gov
All copies of Form 1099-MISC are available on the IRS website.
Body 1099-R
The full name of this form is Form 1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Drawings, IRAs, Insurance Contracts, etc. If you received $10 or more from your IRA or another source of retirement income, you should be paid a 1099-R.
All copies of Form 1099-R are available on the IRS website.
10 Things You Should Know About 1099s
Special Baksheeshes for 1099 Forms
Taxes are not typically withheld from the income sources reported on 1099 forms. An exception to this is if the IRS has tenacious that you are subject to
The Bottom Line
Because taxes are not already withheld from the sources of income included in 1099 make ups, it’s important to track any income reported that way and pay estimated taxes if needed. Alternatively, if you also have a job and fill out a W-4 type, you can have additional taxes withheld to cover your outside extra income.