When you earn money without an employer, that is as a freelancer or as a property owner who receives rent money, you will receive a 1099 form from the person/business/entity who is paying you the money. It consists of a series of documents that show your income where the payer isn’t your employer.
When you work for more than one entity or business, you will receive more than one 1099 tax form. This form will be delivered to you on any day in February. You will have to keep this form safe as it impacts your tax payments.
What is an IRS 1099 Form?
The IRS 1099 form is a collection of documents that highlights how much a company or different companies you have worked with or are working with as a freelancer pay you. It’s important to note that the 1099 form is only for those who don’t work for a company as employees but as freelancers.
The businesses that have paid you for your service will fill out this form reporting the payments they’ve done over the year and other details. They will send one copy of this form to you and another to the IRS (Internal Revenue Service). There are many types of 1099 forms.
Uses of a 1099 Form
The 1099 form is like a record of the income you have received throughout the year. It also reports what kind of job you did for the company to receive their payment. You can use this form in different places on your tax return in order to deduct some money.
Who Gets a 1099 Form?
Since the 1099 form is a record that states a person’s income, anyone who is not a proper employee working for one company can receive it. For example:
- Freelancers for different companies will get this form.
- Part-time contractors will also get this from their clients.
- You will get this form if you have rented an apartment or any of your assets.
- This form will also contain your Social Security Number, which means the IRS will definitely know you’ve received the money. Furthermore, if you don’t report this money on your tax return, they will know about it.
Do I Need a 1099 Form to File My Taxes?
Just because you received a 1099 form, doesn’t mean you have to pay tax on that money or that you owe any tax money. It simply means that you have earned a certain amount of money in one year and the IRS gets notified about it with or without you mentioning it in your tax returns. You don’t have to pay all of it to tax. There is a flip side to paying tax money. You can always save your hard-earned money by deducting some of it and saving it with the help of tax write-offs.
Types of 1099 Forms
There are different types of 1099 forms that the IRS refers to as ‘information returns’. Listed below are the types of 1099 forms that may come your way if you are a freelancer or a contractor:
- 1099-A: If you have decided to sell your property but for some reason, the mortgage lender decided to cancel a portion of your mortgage or failed to pay the entire amount, the IRS will be notified about it. Canceled debt is also income according to the IRS and it will be taxable.
- 1099-B: Were you involved in any kind of bartering system or purchased securities or properties? The seller will fill out this form and send it to you and the IRS. Likewise, if you sell something and someone buys it, you will have to report this income.
- 1099-C: Let’s say you have some debt to pay the credit card issues. You fail to pay it but somehow you and the credit card issuer come to an agreement. Even if the lender themselves forgives the amount you owe them, the IRS claims it as tax deductible and you will have to pay the tax for it.
- 1099-CAP: If you have a share in any capital business or corporation where you received huge amounts of money, stock, or property, you will receive the 1099-CAP form.
- 1099-DIV: Financial institutions use this form to report dividends and distributions from investments you received.
- 1099-G: When the state, local, or federal government gives you money, you will receive the 1099-G form. This includes the tax refund as well.
- 1099-INT: Let’s say you receive more than $10 of interest in any investment you made, you will receive 1099-INT.
- 1099-K: This is exclusively for freelancers who earn more than $20,000 during a calendar year. The transactions don’t just limit to credit card payments. If you received money through Venmo or Cash App and exceeded 200 transactions, you will be sent this form with all the details.
- 1099-LTC: LTC is short for long-term care insurance. You receive this form if an insurance agency is paying you after the death of someone who had a life insurance policy.
- 1099-MISC: When you receive income in the form of awards, giveaways, or prizes, 1099-MISC will catch that and report it to you and the IRS.
- 1099-NEC: Launched in 2022, this form is similar to the 1099-K in which companies pay freelancers and self-employed people for services. These companies will send you this form and will notify the IRS about the payment.
- 1099-OID: You get the Original Issue Discount if you received money from bonds, investments, and certificates sold at a discount. Let’s say a bond’s value is $1200 but is sold for $1000. The receiver captures the extra $200 and informs the IRS.
- 1099-PATR: When you are a part of a co-operative and receive more than $10 as patronage dividends, you receive a 1099-PATR.
- 1099-Q: When you withdraw money from your account, the 1099-Q is sent to you with withdrawal details. This includes education fees for your children and plans like the 529 plan that includes college programs and apprenticeships.
- 1099-R: When you receive pension money or money from any retirement plan, you could receive a 1099-R form. However, many of the retirement plans are tax-deductible and you can save your money by writing this off.
- 1099-S: If you belong to the real estate industry, you receive this 1099-S form when you sell a property or close a property deal. Just like the previous form, even this can be written off on taxes.
- 1099-SA: If you took money out of your Health Savings or Medicare accounts to pay for medicines or surgeries, you receive this form. You don’t have to pay tax for this. This form is just a notification that you have spent a certain amount of money. It also shows you the balance amount.
What Does a 1099 Employee Mean?
According to the IRS, a 1099 employee is someone who doesn’t work for anyone but for themselves. They could be a freelancer, contractor, or also self-employed and working for more than one employer. A 1099 tax form is different from a W-2 tax form which is only for those employed in a company. When you receive this form, you have to report your income when you are filing your taxes.
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