Understanding Tax Forms W-9, 1099-NEC, 1099-MISC, and 1099-K: Navigating Income Reporting and Tax Compliance

There are several different types of 1099 forms, so we’ll break them down for you below, but first let’s talk about the basics. File 100% free when you switch to TurboTax and do your own taxes on the TurboTax app by 2/18. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator.

A Look at 6 Common 1099 Forms

If you don’t receive the corrected form by the end of February, you may call the IRS for help. The IRS uses three main guidelines to determine whether an individual is an independent contractor or an employee. This form is used for withdrawals from an individual retirement account. You may also use it to report distributions from pension plans, profit-sharing, and annuities. Form 1099-CAP reports changes in corporate control and capital structure.

How to Obtain and Fill Out a 1099 Form

Of interest to many people right now is the new 1099-K form. This new form will be issued, starting with sales in 2011, by banks and other payment processors, to report gross receipts of payments. So, those who use PayPal, accept credit cards, and sell on eBay will have their income reported, officially by payment processors, to the IRS. We expect the IRS to move forward with the over $600 reporting threshold for 2023 and the upcoming filing season unless Congress passes a law to change the requirement. Yes, employers may benefit from hiring independent contractors instead of full-time employees.

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Types of 1099 Forms You Should Know About

Another common use for this form is for unemployment compensation of $10 or more. Small businesses and individuals can still barter for goods and services. Trades often go through a third party called a barter exchange, which acts as a bank and facilitates bartering among multiple entities. Each Form 1099 is matched to your Social Security number, so the IRS can easily spew out a tax bill if you fail to report one. If you don’t include the reported item you’re almost guaranteed an audit or at least a tax notice if you fail to report a Form 1099.

The IRS had planned to lower the reporting threshold to $600 for tax year 2023 but delayed implementing the rule and introduced phase-in thresholds. As mentioned, the threshold for 2024 is $5,000; that lowers to $2,500 for 2025 and $600 for 2026. If you’re expecting a 1099 and don’t receive it by mid-February, the IRS suggests contacting the payer as soon as possible. You can also call the IRS’ main customer service number for help if you can’t get in touch with the entity that owes you a 1099.

Regularly updating your knowledge and adapting to new rules will reinforce your financial security. Empower yourself by staying diligent, and make tax season a manageable part of your financial routine. They may have encountered an oversight or delay in sending Certified Bookkeeper the form. It’s essential to verify if they filed a form with the IRS. It’s always recommended to consult the IRS instructions specific to each form type. These guidelines offer precise details on what amounts need reporting and any exceptions.

• Several other 1099 forms exist for transactions such as Social Security benefits, distributions from cooperatives, government payments and more.
• If you’re an employer hiring workers, you’ll have to make a decision about whether you bring someone on as an employee on payroll or as an independent contractor.
• If you pay anybody for a service, whether it’s a person, or an LLC they need to get a 1099.
• Local, state and federal governments also will send 1099s to report tax refunds, credits or offsets.
• These companies may impact how and where the services appear on the page, but do not affect our editorial decisions, recommendations, or advice.

Form 1099-INT: Interest Income

Issuers, such as financial institutions or businesses that hire independent contractors, send one copy to both the IRS and the taxpayer who received the income. Since companies, institutions and individuals don’t withhold taxes on payments made to independent contractors or beneficiaries, the IRS uses 1099 forms to track taxpayer income. Use relevant 1099 forms to report non-salary income to the IRS so the government agency knows what to expect from you. Even if specific incomes are not taxable, ensure you send over the information and keep your tax records. While employees receive a W-2 from their employers to report their wages, independent contractors receive 1099 forms from those they’ve rendered services to or transacted with, in the past year.

Payers are required to send you these forms early in the tax season. It also allows the IRS to have evidence of certain income you received during the tax year. One of the most popular 1099 forms is the 1099-NEC for Nonemployee Compensation payments. If you’re an independent contractor or freelancer, you may receive a Form 1099-NEC documenting payments made to you throughout the year from a particular payer.