What Are Information Returns? W-2s, 1099s, & More

Information returns play a fundamental role within the U.S. tax system, serving as a crucial mechanism for tracking various types of income and payments. These documents are distinct from an individual’s personal income tax return, such as Form 1040. Instead, information returns primarily assist the IRS in monitoring financial transactions and help taxpayers gather the necessary records for accurate tax preparation. The data provided on these forms allows for cross-referencing, ensuring income is reported consistently across all involved parties.

Defining Information Returns

An information return is a tax document filed with the IRS to report specific types of payments or financial transactions, transmitting data about income rather than calculating a tax liability. These forms are typically filed by the payer of income or the entity facilitating a transaction, providing the IRS with a third-party report. This differs from income tax returns, like Form 1040, which are filed by the income recipient to calculate their tax obligations.

Common Information Return Forms

Several types of information returns are commonly encountered, each reporting specific categories of income or transactions. Understanding these forms is essential for both payers and recipients.

Form W-2, Wage and Tax Statement, is issued by employers to report an employee’s annual wages, salaries, and other compensation, along with federal, state, and local taxes withheld. This form is provided to each employee and also filed with the Social Security Administration (SSA) and the IRS. It serves as a comprehensive summary of an employee’s earnings and tax withholdings for the year.

The Form 1099 series encompasses various forms used to report income other than wages. Form 1099-NEC, Nonemployee Compensation, reports payments of $600 or more made to independent contractors, freelancers, and other self-employed individuals for services rendered. Form 1099-MISC, Miscellaneous Information, reports other types of miscellaneous income, such as rents, royalties, prizes, and awards, typically when the amount is $600 or more.

Form 1099-INT, Interest Income, is issued by financial institutions to report interest income of $10 or more paid to an individual. This includes interest from savings accounts, certificates of deposit, and certain bonds. Form 1099-DIV, Dividends and Distributions, reports dividends and other distributions, such as capital gains, from corporations and mutual funds, usually when the amount is $10 or more.

Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., reports distributions of $10 or more from retirement accounts and plans. This form details the gross distribution, the taxable portion, and any federal income tax withheld. Form 1099-K, Payment Card and Third Party Network Transactions, reports payments processed through third-party payment networks, such as credit card transactions or payments received via online marketplaces and payment apps. This form is generally issued if payments exceed $5,000.

Form 1098, Mortgage Interest Statement, is issued by mortgage lenders to report mortgage interest of $600 or more paid by a homeowner during the year. This form also includes information on mortgage insurance premiums and deductible points paid. Schedule K-1 is used by pass-through entities, such as partnerships (Form 1065) and S corporations (Form 1120S), to report a partner’s or shareholder’s share of the entity’s income, losses, deductions, and credits. Trusts and estates also issue Schedule K-1 (Form 1041) to beneficiaries for distributions of income.

Key Data Reported on Returns

Information returns include identifying information for both the payer and the recipient. This typically involves the name, address, and Taxpayer Identification Number (TIN) of both the entity making the payment and the individual or entity receiving it. The core of each information return is the detail about the payment or transaction itself. This includes the gross amount of the payment and a clear indication of the type of income being reported, such as wages, nonemployee compensation, interest, or dividends. Some forms also specify amounts of taxes withheld, including federal income tax, Social Security tax, Medicare tax, and sometimes state income tax.

Obligations for Issuers and Recipients

Both issuers (payers) and recipients (payees) have specific obligations regarding information returns to ensure proper tax reporting. Businesses and individuals who make certain types of payments are legally required to issue these forms. For example, employers must issue Form W-2 to their employees, and businesses paying independent contractors $600 or more must issue Form 1099-NEC.

Issuers must provide copies of the relevant information returns to the recipients. For most W-2s and 1099s, this deadline is typically January 31 of the year following the calendar year in which the income was paid. Copies of these forms must also be filed with the IRS. The filing deadline with the IRS for many forms, such as Form 1099-NEC, is also January 31, regardless of the filing method. Other forms, like some 1099-MISC forms, might have a later deadline, such as March 31 if filed electronically.

Recipients of information returns have a responsibility to review them carefully for accuracy. The information on these forms is essential for completing their own income tax returns, such as Form 1040. Even if an information return is not received, all taxable income must still be reported on the individual’s tax return. If a recipient discovers an error on a received form or does not receive a form they were expecting, they should contact the issuer to request a correction or a missing form.