1099s Explained: Types
Now that we know the basics of IRS Form 1099, we can take a closer look at the different types of 1099s you can receive. Remember, if you received any income outside your employer, you might receive a 1099. While most types of Form 1099 are not commonly received, there are a handful that you are likely to come across at some point. Here’s an overview of the different types of Form 1099.
1099-MISC: Miscellaneous Income
The 1099-MISC is an IRS form used to report $600 or more in miscellaneous income that you received during the tax year. Some examples of payments that require a 1099-MISC form include rent, prizes and awards, medical and health care payments, crop insurance proceeds, attorney payments, and more.
1099-NEC: Nonemployee Compensation
The 1099-NEC form is used to report non-employee compensation, including independent contractors, freelancers, sole proprietors, and self-employed individuals. If you received $600 or more in non-employee compensation during the tax year, you should receive a 1099-NEC. This form is used to report payments made for services rendered, such as consulting fees, professional services, and other types of compensation.
1099-INT: Interest Income
Form 1099-INT is used to report any interest income you earned during the year. If you earned more than $10 in interest income, the financial institution is required to send you and the IRS a Form 1099-INT. Interest income can include any earned from high-yield savings accounts, U.S. savings bonds, municipal bonds, and more.
1099-DIV: Dividends and Distributions
Form 1099-DIV is used to report dividends and distributions that are paid to you during the tax year, as well as any federal income tax withheld. This can include ordinary dividends, which are paid out of a company’s earnings and profits, qualified dividends, capital gain distributions, and non-dividend distributions. It does not include any dividends that you accrued through tax-sheltered retirement accounts. You will typically receive a 1099-INT if you received at least $10 in dividend income.
1099-K: Payment Card and Third-Party Network Transactions
Form 1099-K is meant to track payments made through third-party networks, such as PayPal or Venmo. For the 2023 tax year, you would receive a 1099-K if you earned at least $600 in payments. Since 1099-Ks report gross income, you should be sure to deduct any expenses you had to use third-party payment networks to receive payments.
Other Types of 1099s
- 1099-A, Acquisition or Abandonment of Secured Property: reports foreclosures on properties. You may be liable for capital gains tax and income tax for any unpaid foreclosed mortgage balances.
- 1099-B, Proceeds from Broker and Barter Exchange Transactions: reports the sale of stock, bonds, and other securities through a broker, as well as barter exchange transactions. These transactions must be reported even if you had a loss or broke even.
- 1099-C, Cancellation of Debt: reports discharged, forgiven, or canceled debt. This can include your property foreclosure or forgiven credit card debt but typically excludes debt discharged in bankruptcy. You will need to claim the amount reported on your 1099-C as taxable income.
- 1099-CAP, Changes in Corporate Control and Capital Structure: reports the amount of cash, stock, or property received after a significant change in the company’s control or capital structure.
- 1099-G, Certain Government Payments: reports payments you received from government agencies, including unemployment, tax refunds, taxable grants, and more.
- 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments: reports any advance payments of qualified health insurance payments you received. If you qualify for trade adjustment assistance (TAA), alternative TAA (ATAA), reemployment TAA (RTAA), or Pension Benefit Guaranty Corporation (PBGC), you might see this form.
- 1099-LTC, Long Term Care and Accelerated Death Benefits: reports payments made under a long-term care insurance contract. This includes accelerated death benefits, or benefits received before death because the policyholder has been deemed terminally ill by a doctor. The amount shown on the 1099-LTC are generally tax-free but are required to be reported to the IRS.
- 1099-LS, Reportable Life Insurance Sale: reports the amount paid to you from a life insurance sale.
- 1099-OID, Original Issue Discount: reports $10 or more of income received when bonds, notes, or certificates of deposit (CDs) are sold at a discount from their maturity value.
- 1099-PATR, Taxable Distributions Received from Cooperatives: reports at least $10 in patronage dividends and other distributions from a cooperative (co-op) in the prior year.
- 1099-Q, Payments from Qualified Education Programs: reports total withdrawals from qualified tuition programs (QTPs) like 529 plans or Coverdell educational savings accounts. This amount may be taxable, depending on how the funds were used.
- 1099-QA, Distributions from ABLE Accounts: reports distributions from an Achieving a Better Life Experience (ABLE) Account for special needs individuals with a disability. These funds are not taxable if you used them to support a disabled individual.
- 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.: reports distributions from annuities, profit-sharing plans, retirement plans, IRAs, insurance contracts, or pensions. You should consult with a tax professional about whether you will owe tax on these distributions.
- 1099-S, Proceeds from Real Estate Transactions: reports the sale or exchange of real estate. If the property was your primary residence for two of the five years before the sale, then up to $250,000 of the profit is exempt from taxes. This amount increases to $500,000 for married couples filing jointly.
- 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA: reports distributions made from a health savings account (HSA), Archer Medical Savings Account (Archer MSA), or a Medicare Advantage Medical Savings Account (MA MSA). Distributions can be taxable if they were used to pay for qualified medical expenses, if they were not rolled over in some cases, if excess contributions were made, and other scenarios. You should consult with a tax professional about whether you will owe tax on these distributions.
- 1099-SB, Seller’s Investment in Life Insurance Contract: reports the sale of a life insurance policy like the 1099-LS. The difference is that the original issuer of the policy files a 1099-SB after they receive the 1099-LS. You should consult with a tax professional if you receive either of these forms.
Tax Help for Those Who Receive 1099s
The list of 1099s and the accompanying filing requirements can quickly become very complicated. You should always consult with a tax professional if you are unsure about your tax filing requirements. Remember, even if you do not receive a 1099 for income earned, it’s still your responsibility to include it in your taxable income. Not doing so can be a major red flag to the IRS and can result in an audit. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.
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