Receiving a 1099 is becoming more and more common with the rise in small businesses, side hustles, and the desire for a second stream of income. With the additional income comes a different tax filing process. If you receive a 1099, it’s because you earned a certain amount of income from a non-employer and like most income, 1099 income is taxable. Here’s a breakdown of the basics of the IRS 1099 form.
What is a 1099?
IRS Form 1099 is actually a collection of tax forms, and not just one single form. If you receive these forms, it means that the sender paid you a certain amount of money, usually at least $600, in the previous year. These funds could be from income you received as an independent contractor, rental income, dividend payouts, and more. If you receive a 1099 form, so did the IRS, which means it’s your responsibility to report the income on your tax return.
Who receives a 1099?
There’s a long list of individuals who can receive a 1099. Among many other scenarios, you’ll likely receive a 1099 if you:
- Are a freelancer or independent contractor
- Received $600 or more for rent, prizes, awards, and other types of payment
- Received $10 or more in royalties or broker payments
- Received $20,000 or more via third-party apps like Venmo or PayPal
- Received unemployment compensation
What are the most common types of 1099s?
We’ll break down each type of 1099 in our next post, but here are the most common ones:
- 1099-DIV: Dividends and Distributions
- 1099-G: Certain Government Payments
- 1099-INT: Interest Income
- 1099-K: Payment Card and Third-Party Network Transactions
- 1099-MISC: Miscellaneous Income
- 1099-NEC: Nonemployee Compensation
- 1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.
What if I don’t receive a 1099 for income I earned?
1099s are usually sent out by January 31st each year, or February 15th for some. If you do not receive a 1099 for income worked, you are not off the hook for reporting this income to the IRS. You are still responsible for paying taxes on that income. If you are still waiting for a 1099 after the deadline, reach out to the payer responsible for sending it and request a copy be sent to you. Be sure to give yourself enough time to request and receive the 1099 copy to avoid submitting a late tax return.
Tax Help for Those Who Receive Form 1099
Overall, understanding the 1099 form is important for anyone who receives income from sources other than an employer. By properly reporting all income received on the form, individuals can avoid penalties and ensure that they pay the correct amount of taxes on their income. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
If You Need Tax Help, Contact Us Today for a Free Consultation