The Many Forms for Reporting Non-Employment Income and How to Fill Them Out

Forms 1099 report a wide range of taxable income to the Internal Revenue Service (IRS). Issuers of these payments are obligated to notify the IRS that the transactions have taken place, and they do so by submitting the appropriate 1099 form.

The IRS then compares a taxpayer’s return to the information on any 1099 form in their name bearing their tax identification number.

Failing to report 1099 income on your return can potentially result in an audit. You’ll know that a 1099 has been submitted to the IRS in your name and with your tax ID number because the issuer is obligated to send you a copy of the form.

What Income Is Reported on a 1099?

Forms 1099 report numerous sources of income to the IRS unless the income isn’t taxable or it’s exempt from reporting. Nontaxable sources of unearned income include child support and payments from public welfare funds.

“Exempt” doesn’t mean that the income isn’t taxable, only that a 1099 isn’t required. An example would be payments made to an independent contractor of less than $600. The contractor must report the income on their return and pay taxes, but the payer doesn’t have to submit and issue a Form 1099.

All interest earned from your interest-earning accounts is reported to the IRS on a Form 1099.

Common 1099 Forms

Some 1099 forms source to obscure types of income but others are very common. These are a few that the average taxpayer might expect to find in their mailbox in January or February of the year following the payments.

The exact deadlines for filing 1099 forms with the IRS and sending copies to taxpayers can vary a little by form, but they’re typically issued during the first two months of the new year.

Form 1099-DIV

Form 1099-DIV reports dividend income of $10 or more. This includes exempt interest and capital gain distributions.

Distributions of property are included in this $10 threshold as well. It increases to $600 for money or property that’s paid due to a liquidation. All dividends are reportable if the issuer withholds foreign or federal income tax under backup reporting rules.

Form 1099-INT

“INT” stands for interest. This 1099 is issued by banks, credit unions, and other financial institutions when they pay anyone $10 in interest or more on an account. It’s also required if the issuer withheld foreign tax or federal income tax under backup withholding rules. There’s no reporting dollar limit for these types of payments.

Forms 1099-MISC and 1099-NEC

Form 1099-MISC reports miscellaneous income, which encompasses a large basket. It includes numerous sources, most of them reportable at $600 or more. They include rents, medical and healthcare payments, payments to attorneys, and the value of awards and prizes. Payment for crops and fish are also covered by this 1099. It reports anything that doesn’t fit neatly anywhere else.

The reporting threshold is just $10 for “royalties or broker payments in lieu of dividends or tax-exempt interest,” according to the IRS.

Form 1099-MISC previously reported payments made to independent contractors as well. That changed in 2020, however, when the IRS brought Form 1099-NEC back to life after it was retired in the 1980s. Form 1099-NEC now reports income paid to independent contractors of $600 or more. “NEC” refers to nonemployee compensation.

Form 1099-R

“R” covers a wide range of retirement income, including annuities, insurance contracts, survivor income benefits, pensions, IRAs, total and permanent disability payments, profit-sharing plans, and other retirement plans. The reporting threshold is just $10.

Other Reasons You Might Receive a 1099

The IRS provides 22 Forms 1099 for reporting various types of income. It’s not likely that any dime of unearned income is overlooked. Here’s a list of the other forms:

• Form 1099-A: Acquisition or abandonment of secured property
• Form 1099-B: Proceeds from securities sold through a brokerage or barter exchange
• Form 1099-C: Cancellation of debt
• Form 1099-CAP: Changes in corporate capital structure that affect stocks
• Form 1099-DA: Proceeds from broker transactions on the sale of digital assets
• Form 1099-G: Unemployment compensation and state and local tax refunds
• Form 1099-H: Payments made in advance toward qualifying health insurance expense
• Form 1099-K: Payments from third-party processing platforms such as PayPal or Venmo
• Form 1099-LS: Interest acquired from a life insurance contract
• Form 1099-LTC: Income received from long-term care or accelerated death benefits
• Form 1099-OID: Value realized when you purchase a bond for less than face value and then sell it at face value
• Form 1099-PATR: Taxable distributions received from a co-op
• Form 1099-Q: Payments from qualified education programs such as a 529 plan           
• Form 1099-QA: Distributions made from an ABLE account in the event of disability
• Form 1099-S: Proceeds from a real estate transaction
• Form 1099-SA: Distributions from a health savings account
• Form 1099-SB: Proceeds from the sale of a life insurance policy
• Form SSA-1099: Social Security benefits 

How 1099s Affect Your Taxes

Form 1099 income typically isn’t subject to tax withholding, so you’ll want to make estimated, anticipatory tax payments to the IRS as the year passes. This should prevent you from being hit with a significant tax bill plus interest and penalties when you prepare your return and include income from one or more 1099s.

It’s possible that you didn’t know that some of these sources of income were taxable, however. The IRS offers payment plans in a worst-case scenario. You might need just a few extra months to come up with the money, or you might be able to arrange a long-term payment plan. The IRS is typically willing to work with most taxpayers.

Submitting any 1099 forms you receive with your tax return when you file is unnecessary. The IRS already has their copy.

The Bottom Line

Forms 1099 may well be the reason tax professionals and tax software programs were invented. Consider touching base with a tax professional if you think you’ve received income from a source that will report it on a 1099. Remember that it doesn’t mean you don’t owe taxes on these sources of income just because you don’t receive a 1099. You must still report it on your tax return.