What Is the 1099 Threshold for 2023?

1099 forms are information returns used by the Internal Revenue Service (IRS) to track non-wage income. They are distinct from W-2 forms, which report wages, salaries, and tips paid to employees. 1099 forms report payments to independent contractors, freelancers, and other entities for services or other non-wage income. Specific thresholds determine when a payer must issue them.

Common 1099 Forms and Their Thresholds

Several types of 1099 forms exist, each reporting specific income categories. For the 2023 tax year, understanding these thresholds is important for both payers and recipients. These thresholds are the amounts at which a payer is obligated to issue a 1099 form.

Form 1099-NEC, or Nonemployee Compensation, reports payments for services by nonemployees, such as independent contractors or freelancers. For the 2023 tax year, a payer must issue a 1099-NEC if total payments to an individual or entity reached $600 or more.

Form 1099-MISC, or Miscellaneous Information, reports income not covered by other 1099 forms. A $600 threshold applies for most payments, including rents, prizes, and awards. However, certain income types, such as royalties or broker payments in lieu of dividends, require reporting if they reach $10 or more.

Form 1099-K, used for Payment Card and Third-Party Network Transactions, has a specific reporting threshold. It reports payments processed through third-party payment networks, such as online marketplaces or payment apps. For the 2023 tax year, the reporting threshold for a 1099-K remains at $20,000 in aggregate payments AND more than 200 transactions. The previously proposed lower threshold of $600 was delayed, making the higher threshold applicable for 2023.

Form 1099-INT reports Interest Income. Payers must provide this form if you earned $10 or more in interest during the tax year, including from bank accounts or certificates of deposit. Form 1099-DIV reports Dividends and Distributions. You generally receive a 1099-DIV if you received $10 or more in dividends and other distributions from stocks or mutual funds.

Form 1099-B, or Proceeds From Broker and Barter Exchange Transactions, covers proceeds from sales of stocks, bonds, and other securities. All proceeds from such sales are reported on this form, regardless of the amount. There is no specific minimum threshold for reporting these transactions.

Reporting Income Without a 1099

All taxable income must be reported to the IRS, even if a 1099 form is not issued or if the income falls below a reporting threshold. The absence of a 1099 does not exempt income from taxation. Income not reported on a 1099 still needs to be accurately accounted for on a tax return.

For instance, self-employment income, including earnings from freelancing or contract work, is typically reported on Schedule C, Profit or Loss from Business. This applies even if the income is received in cash or falls below the 1099-NEC reporting threshold. Similarly, interest and dividend income not meeting 1099-INT or 1099-DIV thresholds may still need to be reported on Schedule B, Interest and Ordinary Dividends. Accurate record-keeping of all income and expenses is important for tax compliance.

Responsibilities for Payers and Recipients

Both payers and recipients have responsibilities regarding 1099 forms to ensure accurate tax reporting. Understanding these roles is important for smooth tax compliance.

For Payers

Payers must collect a completed Form W-9, Request for Taxpayer Identification Number and Certification, from independent contractors or vendors before making payments. The W-9 gathers essential information like the payee’s name, address, tax classification, and Taxpayer Identification Number (TIN), which is necessary for preparing and issuing 1099 forms.

Issuing Deadlines

Payers must issue 1099 forms by specific deadlines. Most 1099 forms must be sent to recipients by January 31 of the year following the payment. Deadlines for filing with the IRS vary: 1099-NEC forms are due by January 31, while most others are due by February 28 (paper) or March 31 (electronically). As of 2024, entities filing 10 or more information returns are required to do so electronically.

For Recipients

Recipients should review received 1099 forms for accuracy. If discrepancies are found, contact the payer for a corrected form. 1099 forms are used when preparing tax returns. The income reported on these forms must be reflected on the recipient’s tax filings, such as Schedule C for self-employment income or Schedule B for interest and dividends. Maintaining thorough records of all income and expenses, even those not captured on a 1099 form, is important for substantiating reported amounts and claiming eligible deductions.