What Are the Different Types of 1099 Forms?

The Internal Revenue Service (IRS) uses a series of documents known as Form 1099 to track income that individuals and businesses receive outside of traditional employment wages. These are categorized as “information returns,” meaning their primary purpose is to report payment data to both the recipient and the IRS. This reporting system helps ensure that all taxable income is accounted for when individuals file their annual tax returns.

A payer, such as a business, bank, or government agency, is required to issue a Form 1099 when they make certain types of payments to a non-employee during the calendar year.

1099 Forms for Business and Freelance Income

The most prominent form for business income is Form 1099-NEC, Nonemployee Compensation. The IRS reintroduced this form to specifically report payments of $600 or more made to individuals who are not on the payroll. This includes fees, commissions, or any other form of compensation for services rendered by a non-employee, with the total reported in Box 1. For example, a business that hires a freelance graphic designer would issue a 1099-NEC if payments for the year met the threshold.

Prior to 2020, nonemployee compensation was reported on Form 1099-MISC, Miscellaneous Information. Now, Form 1099-MISC is used for a different set of payments. Its primary uses include reporting at least $600 in rental income, such as for office space or equipment, which is detailed in Box 1. It also covers royalties of $10 or more, shown in Box 2, and other income like prizes and awards of $600 or more, found in Box 3.

Form 1099-K, Payment Card and Third Party Network Transactions, has become common with the growth of the digital economy. This form is issued by payment settlement entities (PSEs), which include credit card companies and third-party payment networks like PayPal or Stripe. It reports the gross amount of payments processed for a payee through these networks.

For the 2024 tax year, the federal threshold for issuing a 1099-K from a third-party network is for gross payments exceeding $5,000. This form reports gross transaction volumes, not necessarily net profit, and can include non-taxable transactions like personal reimbursements from friends and family if they are not coded correctly. A business might need to issue both a 1099-NEC and a 1099-MISC to the same person. For instance, if a business pays an individual $1,000 for consulting and also pays them $700 in rent for equipment, the individual would receive a 1099-NEC for the $1,000 and a 1099-MISC for the $700.

1099 Forms for Investment Income

Investment activities generate their own specific set of 1099 forms, which are issued by financial institutions like banks and brokerage firms. One of the most common is Form 1099-INT, Interest Income. This form is sent to anyone who has been paid $10 or more in interest from a single payer during the year. The total taxable interest, which must be reported on a tax return, is shown in Box 1.

Another frequently received investment form is Form 1099-DIV, Dividends and Distributions. Brokerage firms and mutual fund companies issue this form to investors who have received more than $10 in dividends or other distributions. The form breaks down the types of dividends received because different types can be taxed at different rates. Box 1a shows the total amount of ordinary dividends, while Box 1b specifies the portion of those dividends that are “qualified,” making them eligible for lower long-term capital gains tax rates.

For investors who sell securities, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, is the relevant document. This form is issued by a broker to report the gross proceeds from the sale of assets like stocks, bonds, and mutual funds. It provides information needed to calculate capital gains or losses, including the description of the security sold, the date of acquisition (Box 1b), and the date of sale (Box 1c). The form also reports the gross proceeds from the sale in Box 1d.

Many versions of Form 1099-B will also report the cost basis of the security sold in Box 1e. The cost basis is what you paid for the asset, and it is subtracted from the sales proceeds to determine the capital gain or loss. Brokers are required to report the cost basis for most securities purchased and sold in recent years.

1099 Forms for Retirement and Other Distributions

When individuals take money out of retirement plans or other tax-advantaged savings accounts, the financial custodians of those accounts are required to report these transactions. The most prevalent form in this category is Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. This form is issued by entities like IRA custodians or 401(k) plan administrators whenever a distribution of $10 or more is made from one of these accounts. Key information on this form includes the gross distribution amount in Box 1 and the taxable portion of that distribution in Box 2a.

Information on Form 1099-R is often found in Box 7, which contains a distribution code. This code explains the nature of the distribution and dictates its tax treatment. For example, a code ‘1’ indicates an early distribution where no known exception to the 10% penalty tax applies, whereas a code ‘2’ signifies an early distribution where an exception, such as for a first-time home purchase, may apply. A code ‘7’ denotes a normal distribution, typically for a recipient who is over age 59 ½.

Other forms in this category include Form 1099-SA and Form 1099-Q. Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA, is issued by the trustee of a Health Savings Account (HSA). It reports the total distributions taken from the account during the year, shown in Box 1. These distributions are tax-free as long as they were used to pay for qualified medical expenses. Form 1099-Q, Payments From Qualified Education Programs, reports distributions from 529 plans and Coverdell Education Savings Accounts, which are not taxable if the funds were used for qualified education expenses.

Other Common 1099 Forms

Beyond income from work, investments, and retirement accounts, several other types of payments are reported on 1099 forms. One widely issued form is Form 1099-G, Certain Government Payments. State unemployment agencies send this form to report unemployment compensation paid to an individual, with the total amount shown in Box 1. This compensation is considered taxable income at the federal level. State and local governments also use Form 1099-G to report tax refunds, credits, or offsets in Box 2, which may be taxable if the taxpayer itemized deductions in the prior year.

Form 1099-C, Cancellation of Debt, is issued by a financial institution when they forgive a debt of $600 or more. The amount of debt that was canceled is reported in Box 2 and is often considered taxable income to the debtor. The logic is that the borrower has an economic gain because they are no longer required to pay back the money. There are, however, exceptions, such as for debts discharged in a bankruptcy case or to the extent the taxpayer was insolvent immediately before the cancellation.

Another common form is Form 1099-S, Proceeds from Real Estate Transactions. This form is typically issued by a settlement agent, such as a title company, following the sale or exchange of real estate. Box 2 of the form reports the gross proceeds from the transaction. This amount represents the total sale price, not the profit, and the seller must calculate their actual capital gain or loss by subtracting their cost basis in the property from these proceeds.

What to Do After Receiving a 1099

Upon receiving any Form 1099, the first step is to verify that the information, particularly your name, taxpayer identification number, and the income amount, is accurate. The primary action is to use the information to report the income on your federal tax return. The specific location for reporting depends on the type of 1099. For instance, income from Form 1099-NEC is reported on Schedule C, while interest from Form 1099-INT and dividends from Form 1099-DIV are reported on Schedule B. Proceeds from Form 1099-B are used to complete Form 8949 and Schedule D.

If you discover an error on a 1099 form, you should immediately contact the payer who issued it. Request that they issue a corrected Form 1099, which will have the “CORRECTED” box checked at the top. If the payer refuses or fails to provide a corrected form, you should report the correct income figure on your tax return and attach a statement explaining the discrepancy to avoid an automatic notice from the IRS.

A payer is generally required to send 1099s by January 31. If you have not received an expected form by mid-February, you should first contact the payer to request it. Regardless of whether you receive the form, you are still legally obligated to report all taxable income you earned. Use your own records, such as bank statements and invoices, to determine the correct income amount and report it on your tax return.