The IRS form 1099 consists of multiple forms. The Internal Revenue Service refers to this group of documents as information returns. In addition to earnings, salaries, and tips, these forms detail various sources of income you might have.
How Do Information Returns Work?
There are two functions of information returns:
- For tax purposes, they must declare certain dealings.
- With this data in hand, the taxpayer can more easily report these transactions on their tax return.
In a nutshell, information returns detail any earnings or allowable expenditures from the previous fiscal year. Complete your tax return with the help of the form’s instructions. Next, the IRS checks your stated income and deductions against the figures on your information returns to confirm accuracy.
When you e-file your Form 1040 income tax return, you don’t need to include paper copies of any supporting documents. Paper filers must include a copy of their 1099 if it reflects income tax withholding.
Form 1099 can be completed in a wide variety of ways.
Form 1099-INT: Interest Earnings
If you earned more than $10 in interest across all of your accounts with a financial institution in a given year, that institution is required by law to issue you a Form 1099-INT. This includes banks, savings accounts, and brokerages (if you have a mutual fund account).
Regardless of whether the interest income recorded on Form 1099-INT is taxable or tax-exempt, you must include it in your yearly tax filing.
Form 1099-INT is also where your financial institution will report any early withdrawal penalties you may have incurred, such as when you cash out a certificate of deposit before its maturity date. Schedule 1 of your federal income tax return can be used to deduct these expenses; you don’t even have to itemize to do so.
The 1099-INT form can now be obtained electronically from many financial institutions. Whether you are expecting a Form 1099-INT but have not received it by mail, check to see if it has been made available for download from your financial institution.
Form 1099-DIV: Dividend Paying
If you received more than $10 in dividend income during the tax year, your financial institution is required by law to send you IRS Form 1099-DIV. Distributions of capital gains from mutual funds will also be reported here.
You must report all dividend income to the IRS, even if you don’t get Form 1099-DIV from your financial institution. Total dividends for the year are often listed on a shareholder’s annual report.
Form 1099-R: Taking Money Out of Retirement Accounts
A Form 1099-R is generated if you make any transfers to or from your retirement accounts throughout the calendar year.
Examples of common events that warrant a Form 1099-R are:
- Transferring money from a former employer’s 401(k) retirement plan to a new employer’s plan or a rollover IRA is known as rollover (IRA)
- Changing over from a regular IRA to a Roth IRA
- Using a payout in advance as a down payment on a home or college tuition
- Spending money one has saved during retirement
If you’re making a tax-free transfer of retirement funds, you might be surprised to get a tax form. The whole amount of your withdrawals or transfers will be listed in Box 1 of Form 1099-R, while the taxable portion will be reported in Box 2a. Box 2a should be left blank or filled in with zeros for a tax-free rollover.
To further clarify the nature of the withdrawal, enter a code in Box 7 to inform the IRS, your tax software, or your tax preparer. Verify your assumptions by reviewing the 1099-R guidelines. If you have doubts about the accuracy of your IRS tax form, you should contact the company that supplied it for clarification or a new copy.
This form also details any state or federal taxes withheld on your behalf, which can be applied to reduce the total amount of tax you owe when you file your return.
Form SSA-1099: Advantages of Social Security
After you reach retirement age and choose to begin collecting your Social Security benefits, the Social Security Administration (SSA) sends you a Form SSA-1099 each year to report your total benefits and the amount withheld for federal income taxes.
Your Medicare premium withholding and any overpayments you owe back from the prior year will also be detailed on Form SSA-1099. Some of these benefits could be taxable if you have other sources of income, so filling out this form is crucial.
Form 1099-MISC: Money from Other Sources
If you have received money that does not fit any of the other categories on a 1099 form, you should use the “miscellaneous” category and file a Form 1099-MISC.
For example:
- Royalties
- Rent
- Prizes and awards
- Medical and health care payments
- Crop insurance proceeds
- Payments to an attorney
- Other income
The amount of federal income tax withheld by the payer is also included in Box 4 of the 1099-MISC.
Form 1099-NEC: Compensation for Non-Employee
Form 1099-NEC is a tax document that may be sent to you if you are self-employed, run your own business, or operate as a freelancer or independent contractor. If a business pays an independent contractor $600 or more in fees or commissions, it must file a Form 1099 with the IRS.
Schedule C of Form 1040 should be used to report this type of income. Form 1099-MISC was previously used to report such data. However, beginning in 2020, the IRS mandated that companies use Form 1099-NEC to disclose these types of payments.
Additional 1099 Form Subtypes
In addition to the standard information returns, there is a plethora of specialist 1099 forms available. Check out the IRS’s General Instructions for Certain Information Returns for a rundown of all the different types of information returns and information on who is responsible for distributing them.
These 1099s cover the following areas:
- 1099-A. Acquisition or Abandonment of Secured Property
- 1099-B. Proceeds from Broker and Barter Exchange Transactions
- 1099-C. Cancellation of Debt
- 1099-CAP. Changes in Corporate Control and Capital Structure
- 1099-G. Certain Government Payments
- 1099-H. Health Coverage Tax Credit (HCTC) Advance Payments
- 1099-K. Payment Card and Third Party Network Transactions
- 1099-LTC. Long-Term Care and Accelerated Death Benefits
- 1099-LS. Reportable
Life Insurance Sale - 1099-OID. Original Issue Discount (a form of interest income resulting from companies issuing bonds at a price less than their redemption value)
- 1099-PATR. Taxable Distributions Received from Cooperatives
- 1099-Q. Payment from Qualified Education Programs (such as 529 college savings plans and Coverdell education savings accounts)
- 1099-QA. Distributions from ABLE Accounts
- 1099-S. Proceeds from Real Estate Transactions
- 1099-SA. Distributions from an HSA, Archer MSA, or Medicare Advantage MSA
- 1099-SB. Seller’s Investment in
Life Insurance Contract - RRB-1099. Payments by the Railroad Retirement Board
- RRB-1099-R. Annuities or Pensions by the Railroad Retirement Board
Bottom Line
Look into whether or not the payer issued your 1099 electronically if you need it to complete your tax return. You can check your mailbox or sign in to your account to see if it has been made available for download. Otherwise, you should contact the payer to inquire about the expected delivery date.
Use tax preparation software like TurboTax or H&R Block to simplify what can seem like a daunting task. It’s easy to use tax software; you just answer certain questions and enter the numbers from your 1099 forms, and the program does the rest, filling out the appropriate forms and determining your refund or owing amount.
