Form 1099

 

Interested in learning more about the 1099 form? Many taxpayers may not know much about this form, but it is actually used a lot. We’re here to tell you what it is, how it’s used, and share more information about the variations of the 1099 form, like the Form 1099B, 1099-MISC and 1099-DIV.

What is a 1099 Form?

If you’re wondering “what is a 1099 form?”, here’s the simple answer: different 1099 forms are used for reporting various types of income other than wages reported on a Form W-2.

1099 employee form

For example, a Form 1099-MISC is used to report to each person who has been paid at least $600 in income from services, rents, prizes, awards, or other income payments.

When Do You Receive a 1099 Form?

Most Forms 1099 are required to be furnished by the payer to you by January 31, but no later than February 15. Note if the due date (January 31) falls on a Saturday, Sunday, or holiday, the due date is the next business day. The types of Forms 1099 that you will frequently encounter during the tax season are:

  • Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
  • Form 1099-DIV, Dividends and Distributions
  • From 1099-INT, Interest Income
  • Form 1099-MISC, Miscellaneous Income
  • Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

Are You Subject to Backup Withholding?

In certain circumstances, income reported on a Form 1099 may be subject to backup withholding. The payers of the income will do the following if backup withholding applies:

  • Show the tax withheld on Form 1099, and
  • Withhold tax at a rate of 28%, if any of these apply:
    • You don’t provide the payer with your tax identification number, like your Social Security number (SSN).
    • The taxpayer identification number (TIN) you provide is incorrect.
    • The IRS notifies the payer that you’ve been underreporting interest or dividends.
    • You haven’t certified that you’re exempt from backup withholding.

Understanding Various 1099 Tax Forms

Form 1099-B

Form 1099-B is for reporting proceeds from securities transactions. Report securities transactions on Form 8949. If you have an account at a brokerage or mutual fund company, any Form 1099-B you receive might report:

  • A single transaction
  • Multiple transactions

You need this Form 1099-B information when preparing your return:

  • Box 1a: Date of sale or exchange — This is the date the transaction took place. Use it as the sales date on your Form 8949.
  • Box 2a: Stocks, bonds, etc. — This is the amount of money you received on the sale of your securities. Report it as the sales price on your Form 8949. The brokerage firm or mutual fund company usually reduces this amount by commissions. See the checkbox next to the Box 2a amount.
  • Box 8: Description — This is a brief description of the asset sold. Enter this amount on your Form 8949.

Some firms also provide information about the cost basis of the asset sold. You can use this information on Form 8949. Brokers and mutual-fund companies are required to:

  • Report the basis of the shares acquired and sold after 2010 on Form 1099-B
  • Classify the resulting gain or loss as either short or long-term

For securities bought before 2011, firms can choose if they want to include the cost basis on Form 1099-B. If you don’t include it, you’re responsible for figuring your cost or other basis.

Form 1099-DIV

Form 1099-DIV is used for reporting income from stocks and mutual funds:

  • Dividends
  • Capital gain distributions

You need this 1099-DIV information when preparing your return:

  • Box 1a: Ordinary dividends — Enter this amount on Form 1040 or on Schedule B (if required). It’s taxable at ordinary income rates.
  • Box 1b: Qualified dividends — This amount shows the portion of Box 1a that’s taxed at a lower rate. Box 1a amounts aren’t always taxed at ordinary income rates.
  • Box 2a: Total Capital gain distributions — Enter this amount on Form 1040 or Schedule D (if required). It might be eligible for a lower tax rate.
  • Box 6: Foreign tax paid — This amount is taxes paid to a foreign government on international investments. You may be able to claim a foreign tax credit or itemized deduction on your Form 1040, Schedule A for this amount. It is best to choose the option that gives you the best tax advantage. Check with a tax professional if you are unsure of the best options.

Form 1099-INT

Form 1099-INT is for reporting interest income received. You need this 1099-INT information when preparing your return:

  • Box 1: Interest income — Enter this amount on Form 1040 or on Schedule B (if required). It’s taxable as ordinary income.
  • Box 2: Early withdrawal penalty — This amount is charged when you withdraw a time investment, like a CD, early. Enter this amount as an adjustment to income on Form 1040, Line 30.
  • Box 3: Interest on U.S. Savings Bonds and Treasury obligations — Report this interest on Form 1040 or Schedule B (if required). It’s usually taxable on your federal return. It’s usually not taxable on your state return.

1099-MISC

1099-MISC Form is used to report many types of income. The main types usually require the use of additional forms on your return. The main types include:

  • Rents
  • Royalties
  • Nonemployee compensation

You need this Form 1099-MISC information when preparing your return:

  • Box 1: Rents — Report real-estate rental income you receive on Schedule E. Report rent for personal property, like machinery, on Schedule C. Income reported on Schedule C usually is subject to self-employment tax.
  • Box 2: Royalties — Income you receive for:
    • The right to your work over a specified period of time,
    • Extracting natural resources from your property.

Note: Report this income on Schedule C or Schedule E. Consult with a tax professional to assist you in reporting this income.

  • Box 7: Nonemployee compensation — Income you receive for contract labor or self-employment. You must usually report this income on Schedule C and pay self-employment tax on the net profit.
    • Note, starting in tax year 2020 (for forms furnished in 2021) you’ll receive new Form 1099-NEC for nonemployee compensation instead of Form 1099-MISC with Box 7 checked.

Form 1099-R

Form 1099-R is used to report distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, and insurance contracts. You may also receive Forms SSA-1099, RRB-1099, or RRB-1099-R from the Social Security Administration or Railroad Retirement Board to report the benefits you received during the year. Social security benefits (and equivalent railroad retirement benefits) are reported on Form 1040, lines 5a and 5b. Railroad retirement benefits that are pension benefits are generally reported on Form 1040, lines 4a and 4b.

Where to Go for Help With 1099 Forms

If you are an employer issuing a 1099 form for contractors, consider enlisting the help of H&R Block. H&R Block offers small business taxes and accounting services to help your business grow and thrive. Schedule a consultation with one of our experts today.

Still need help? View answers to more tax questions.

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