What is
Form 1099?

Form 1099 is a series of several IRS tax forms collectively called information return forms. These 1099 forms are used to reports various types of payments to the IRS. When a business makes (or receives) certain payments, those payments are reported to the IRS on these 1099 forms.

Some examples of the payments reportable on 1099 forms include payments to independent contractors, rental property income, payments to an attorney, income from interest and dividends, sales proceeds, and other miscellaneous payments

Significance of 1099 forms

In addition to reporting these payments to the IRS, the business is also required to send copies to the independent contractors referred to as recipients or payees. These payee statements are then used by payees when filing their taxes. These 1099 forms allow the IRS to collect taxes from the payees and are very important for the IRS. The IRS spends a lot of resources to make sure businesses are complying with its regulations in filing 1099s timely and accurately. The businesses are legally liable to report all reportable amounts on 1099 forms. Failure to file correct 1099 forms may result in penalties. Please take a look at the 1099 penalties.

For payees, not all payments reported on 1099 forms are taxable. Proceeds from real estate sales transactions reported on Form 1099-S is a good example. On form 1099-S sales processed are reported without regard to the taxpayer’s “basis” in the real estate transaction. For tax liability, the gain is calculated by deducting the basis of the sale amount (cost incurred to acquire the property) from the proceeds amount (reported on Form 1099-S).

1099 Filing requirements

Each payer must complete Form 1099 for each reportable transaction and send it to the IRS. The 1099s must accompany Form 1096, which is a summary form. Payers having more than 250 forms to file, must file their 1099s electronically. When filing 1099 electronically, the summary form 1096 is not required. The 1099 form must also be provided to each recipient that has a reportable amount. The form must be filed by the end of January following the year when the payments were made. Each type of 1099 form may have a different filing deadline. Please check out the filing due dates for 1099 forms. If a payer fails to file an accurate 1099 form, there may be penalties. The 1099 penalties could be heavy, and a payer must be aware of the penalties. Please check out the detailed 1099 penalties.

1099 requirement payments you made:

If you made any of the following types of payments as part of your business, you might be required to file a form 1099

Payments made to in independent contractors or others (not an employee of your business) for service performed during the year (Form 1099-NEC)

Following payments for Form 1099-MISC

Rent (Box 1)

Royalties (Box 2)

Prizes and awards and certain other payments (see Instructions for Form 1099-MISC, Box 3. Other Income, for more information)

Backup withholding or federal income tax withheld (Box 4)

Crewmembers of your fishing boat (Box 5)

To physicians, physicians’ corporation or other supplier of health and medical services (Box 6)

Substitute dividends or tax-exempt interest payments and you are a broker (Box 8)

Crop insurance proceeds (Box 10)

Gross proceeds of $600 or more paid to an attorney (Box 14)

Interest on a business debt to someone (excluding interest on an obligation issued by an individual) (1099-INT)

Dividends or other distributions to a company shareholder (1099-DIV)

Distribution from a retirement or profit plan or from an IRA or insurance contract (1099-R)

Payments to merchants or other entities in settlement of reportable payment transactions, that is, any payment card or third party network transaction (1099-K)

 

1099 requirement payments you received:

If you received any of the following types of payments as part of your business, you might be required to file a form 1099

Sale or exchange of real estate (1099-S)

You are a broker, and you sold covered security belonging to your customer (1099-B)

You released someone from paying a debt secured by property or someone abandoned property that was subject to the debt (1099-A) or otherwise forgave their debt to you (1099-C)

You made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment (1099-MISC)

 

Form 1099 is not required:

You are not required to file Form 1099 if any of the following situations apply:

You are not engaged in a trade or business.

You are engaged in a trade or business and

• The payment was made to another business that is incorporated but was not for medical or legal services or
• The sum of all payments made to the person or unincorporated business is less than $600 in one tax year. This may vary by form type. Look at the list above or instructions for different forms for more details.

 

Check out 1099 deadlines for more information.

List of 1099 forms:

The following table provides information for each type of 1099 form.

Form Type	Use	Minimum reportable amount	Who needs to issue the form
1099-A	Acquisition or Abandonment of Secured Property	Any amount	Lender
1099-B	Proceeds from Broker and Barter Exchange Transactions	Any amount	Broker or barter exchange
1099-C	Cancellation of Debt	$600	Lender
1099-CAP	Changes in Corporate Control and Capital Structure	$100 million	Corporation
1099-DIV	Dividends and Distributions	$10 ($600 for liquidations)	Investment fund company
1099-G	Government Payments	$10	Government agency
1099-H	Health Insurance Advance Payments	Any amount	Provider of health insurance coverage
1099-INT	Interest Income	$10 ($600 for some interest)	Payer of interest income (usually a bank, financial institution, or government)
1099-K	Merchant Card and Third Party Network Payments	$20,000	Banks and other payment processors
1099-LS	Reportable Life Insurance Sale	Any amount	Issuer
1099-LTC	Long-Term Care Benefits	Any amount	Insurance company
1099-MISC	Miscellaneous Income	$600 for most compensation ($10 for royalties)	Payer
1099-NEC	Non-Employee Compensation	$600	Payer
1099-OID	Original Issue Discount	$10	Issuer of the debt instrument or broker
1099-PATR	Taxable Distributions Received From Cooperatives	$10	Cooperative
1099-Q	Payment from Qualified Education Programs	Any amount	Administrator or bank that manages one's 529 plan or Coverdell ESA
1099-R	Distributions from Pensions, Annuities, Retirement Plans, IRAs, or Insurance Contracts	$10	Custodian
1099-S	Proceeds from Real Estate Transactions	$600	Person responsible for closing the transaction; if no one is responsible for closing the transaction, then in order: the mortgage lender, the transferor's broker, the transferee's broker, or the transferee
1099-SA	Distributions From an HSA, Archer MSA, or Medicare Advantage MSA	Any amount	Institution that administers the HSA or MSA
1099-SB	Seller’s Investment in Life Insurance Contract	Any amount	Issuer