What Is Form 1099 and Who Needs to File It?
Understand the role of Form 1099 in the tax process. This guide clarifies the reporting obligations for businesses and the tax implications for recipients.
Form 1099 is a series of documents known as information returns, used to report certain types of payments made by a business or individual that are not wages, salaries, or tips. These forms report income to both the Internal Revenue Service (IRS) and the person or company that received the payment. This dual-reporting system helps ensure that individuals and businesses accurately report their income for tax compliance purposes.
Common Types of Form 1099
One of the most frequently used documents is Form 1099-NEC, Nonemployee Compensation. This form is for reporting payments of $600 or more made to independent contractors, freelancers, or other self-employed individuals for services performed for a trade or business. Prior to the 2020 tax year, this income was reported on Form 1099-MISC, but the reintroduction of the 1099-NEC created a dedicated form for these payments.
Form 1099-MISC, Miscellaneous Information, covers a broader range of payments. Businesses use this form to report payments of at least $600 for rent, prizes, awards, and payments to an attorney. It also has a reporting threshold of $10 for royalties. The distinction is that 1099-MISC is for payments not subject to self-employment taxes, while 1099-NEC is for payments that are.
For investment-related income, Form 1099-INT reports interest payments of $10 or more from sources like savings accounts. Form 1099-DIV is sent by banks and brokerage firms to report dividends and other distributions from stocks or mutual funds, also with a $10 reporting threshold.
Other common forms include Form 1099-K, Payment Card and Third Party Network Transactions, issued by organizations like PayPal. For the 2025 tax year, the reporting threshold for these platforms is for payments exceeding $2,500, following a $5,000 threshold in 2024. Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., is used to report distributions of $10 or more from retirement accounts.
Payer Responsibilities and Requirements
Businesses that make certain types of payments during the year are responsible for filing Form 1099. This rule applies to payments made in the course of a trade or business, which includes for-profit companies, non-profit organizations, and government agencies. Payments made for personal reasons are not reportable.
To issue a Form 1099, the payer must collect the recipient’s legal name, mailing address, and Taxpayer Identification Number (TIN). The TIN is either a Social Security Number (SSN) for an individual or an Employer Identification Number (EIN) for a business.
The standard method for collecting this data is Form W-9, Request for Taxpayer Identification Number and Certification. A business should request a completed W-9 from any U.S.-based vendor or contractor before issuing payment. The W-9 is not sent to the IRS; instead, the payer keeps it for their records and uses the information to populate the appropriate Form 1099. Blank W-9 forms can be downloaded from the IRS website.
How to Prepare and File Form 1099
To prepare a Form 1099-NEC, the payer enters the total compensation paid for the year in Box 1. For a Form 1099-MISC, rent payments go in Box 1, while royalties are reported in Box 2. For paper filing, payers cannot download and print a copy of the form. The official scannable red-ink version of Copy A must be used for filing with the IRS and can be ordered or purchased at office supply stores.
For Form 1099-NEC, copies must be sent to both the recipient and the IRS by January 31 of the year following the payment. For most other 1099 forms, including the 1099-MISC, the deadline to furnish a copy to the recipient is also January 31. The deadline to file with the IRS is February 28 for paper filings or March 31 for electronic filings.
Payers can submit forms to the IRS by mail or electronically. When filing paper forms, the payer must also include Form 1096, Annual Summary and Transmittal of U.S. Information Returns, with a separate 1096 for each type of 1099 filed. Electronic filing is required for any business filing 10 or more information returns in aggregate. The IRS provides a free online portal called the Information Returns Intake System (IRIS) for this purpose, which allows filers to key in information or upload a file.
Recipient Actions and Tax Implications
When you receive a Form 1099, the first step is to review it to ensure all information is accurate, including your name, TIN, and the payment amount. The IRS matches the income reported on these forms against your filed tax return.
Freelancers or independent contractors who receive a Form 1099-NEC report the income on Schedule C, Profit or Loss from Business. This schedule allows the recipient to report gross income and deduct any ordinary and necessary business expenses. Income from Form 1099-INT and Form 1099-DIV is reported on Schedule B, Interest and Ordinary Dividends, if the total amount exceeds $1,500.
If you discover an error on a Form 1099, contact the payer who issued it and request a corrected form. The payer issues a new 1099 with the correct information and checks the “CORRECTED” box at the top. This new form is sent to both you and the IRS to replace the initial incorrect filing.
If you do not receive an expected 1099, you are still legally obligated to report all income earned. If the form has not arrived by mid-February, contact the payer. If that fails, you must still report the income accurately on your tax return using your own records.