Learn about the several types of 1099 forms and their different purposes for your business.
What is a 1099 form?
A 1099 is an “information return form” for taxpayers to report any income that wasn’t a salary to the IRS.
It’s not quite the same as filing a 1040 form for your tax return, but 1099s play a role in helping the IRS understand exactly what you earned during the year—and if you’ll owe any extra money from your taxable income.
There are different types of 1099 forms but we’ll go over the most common ones used in small businesses, and why. So, let’s get into it.
The Most Popular Types of 1099 Forms
As we mentioned earlier, there are a lot of 1099 forms—20 types to be exact. Instead of overwhelming you with information overload, let’s look at the 1099 forms that small business owners use to document specific payments made or received throughout the tax year.
Here are the 1099 forms you might be (or should be) familiar with:
The 1099-INT is used to report your interest income. If you have a savings account, you (a.k.a. the “submitter”) likely had to fill out a W9 form for the bank (a.k.a. the “requester”) when you opened the account, and received a 1099-INT at tax time each year.
If you earned more than $10 from your interest income during the year, the bank is required to send you a 1099-INT but you’ll likely receive one even if you earned less.
The 1099-DIV is used to report your dividend income. If you have a brokerage account or investments, you probably completed a W9 form for the bank or investment when you opened your account and/or made the investment, and received a 1099-DIV at tax time each year.
Like 1099-INTs, if you were paid more than $10 throughout the year by your bank or investments, you should expect a 1099-DIV form from them but you’ll likely receive one regardless.
The 1099-B is used to report any gains or losses from transactions like stocks, bonds, mutual funds, and any other securities through your broker. If you had any capital gains or losses from these transactions within the year, you’ll likely receive a 1099-B at tax time each year. Make sure you give these forms to your accountant because they’re necessary to calculate any gain or loss.
The 1099-NEC is used to report any compensation to independent contractors that exceeded $600 during the year. This is called nonemployee compensation and it’s reported in the Box 1 section on the 1099-NEC form. If you received compensation from an individual or company in the course of business, you most likely filled out a W9 form for the payer.
Let’s say you received a 1099-NEC from a company because you’re an independent contractor (not an employee of the company) who created a beautiful website for their business. That company would pay you for your services and—if the amount is more than $600—also send you a 1099-NEC during tax season to report your compensation to the IRS.
On the flip side, if you hire a web designer to create a beautiful website for you, you should also get a copy of their W9 and issue them a 1099-NEC at the end of the year assuming the payment qualifies.
The 1099-MISC is used to report any miscellaneous income. There are several types of miscellaneous income that are covered on this form, but not nonemployee compensation, that is now reported on a separate form, the 1099-NEC which you can read about above. If you were paid any of the following during the year, you’ll likely receive a 1099-MISC at tax time.
Types of compensation reported on 1099-MISC are (but not limited to):
- $600 or more in rent, prizes, or awards
- $10 or more in royalties
- Any fishing boat proceeds
The 1099-K is used to report your credit card and third party transactions. This means if you have a merchant account or received payments from a third party (PayPal, Shopify, or Airbnb to name a few), and received over a certain amount and/or have transactions over a certain amount, the merchant company/third party will issue you a 1099-K.
If you do have a merchant account or third party payment processor (like Stripe), you likely had to fill out a W9 for the merchant account/third party when you opened the account.
What if You Didn’t Receive All Your 1099s?
Let’s say you didn’t receive your 1099 because you moved during the year, or maybe you have missed mail out there floating around. Regardless, if you received compensation but didn’t receive a 1099, try your best to get your hands on that form.
The easiest way to do that is to pull your transcripts here from the IRS’s wage and income database. In about 15 minutes, it’ll show you every 1099 form that’s been filed under your Social Security Number. Use this to confirm you have everything before filing your taxes.
It’s really important not to neglect reporting any income to the IRS as it’s a good way to get caught up in an audit if you don’t report income you received during the year.
Whether you’re a small business who paid a contractor for their hard work, or you were cut a check by your bank for your interest earnings, you’ll likely be swimming in 1099s come tax time.
If you aren’t sure what type of payments you made or received would qualify for a 1099 form, get with your CPA to crunch the numbers. And remember to keep track of all your financial transactions and payments during the year!
Please reach out, we’d love to help!
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Countless assumes no liability for actions taken in reliance upon the information contained herein.