Everything You Need to Know About Form 1099: Types and Importance for Taxpayers

Form 1099 is a series of documents created by the Internal Revenue Service (IRS) that report various types of income a taxpayer may have received throughout the year, other than salary. The form arrives in late January or early February and intimates the recipient of the various kinds of income credited to them during the year. Once the income is on this form, it is known to the IRS, and any discrepancies between income reported on the tax return and income reported on the 1099 form will raise a flag while processing the return. There are sixteen types of Form 1099s, including Form 1099-MISC, which is the most common and covers any type of income. The social security number is used to identify the income of the recipient.

What is a 1099 form?

The  IRS Form 1099 is a series of documents the Internal Revenue Service (IRS)  that report the various types of income a taxpayer ( the recipient of the 1099 form)   may have received throughout the year other than the salary. This is one form that arrives, generally, in late January or early February. So, when it arrives, take it seriously. Apart from your  Social Security number, the 1099 Form intimates various kinds of income credited to you during the year. For example, it may include information about

  1. the  interest receipt
  2. Any  consulting fee, you received  or
  3. were paid some other kind of income.

Now, once the income is in this form, means it is known to IRS. So if your income reported on a tax return is less than the income shown on this form, IRS will raise a flag while processing your return.

Types of 1099 Forms

There are several types of 1099 tax forms created by the IRS . A summary of the following sixteen types of Form 1099s will help you understand their purpose and why you should give attention to them.

(i)1099-A

The Form 1099-A is a reporting form for mortgage lenders So if you cancel your mortgage with him, or you have a short-sold home, the mortgage lender will report to IRS and a copy will be forwarded to you.

(ii)1099-B

If you get income from the sale of securities or do some transactions through bartering exchanges websites, Form 1099B will be issued by the payer exchanges.

(iii)1099-C

Form 1099-C will be issued by the credit card issuer, in case it forgives any debt . Because the forsaken amount of debt is your income and IRS will match your tax return.

(iv)1099-CAP

If you hold shares of a corporation that was acquired and you received some consideration for the stock or other property as a result, you will get Form 1099-CAP.

(v)1099-DIV

The 1099-DIV reports dividends, however, it doesn’t include dividends on your share account at the credit union.

(vi)1099-G

You will get Form 1099G if you received money from the state, the local, or federal government — including a tax refund, credit, or offset — you might get one of these.

(vii)1099-INT

Form 1099-INT will be issued if you earned more than $10 in interest from a bank, brokerage, or other financial institution.

(viii)1099-MISC

This 1099 misc form is for many types of income including Income from prizes and awards.

(ix)1099-NEC

This is a newly introduced form. If you employed freelancers or people who were self-employed you should send a Form 1099-NEC instead of a Form 1099-MISC in early 2021 to all those freelancers.

(x)1099-OID

Form 1099-OID is issued to you if you bought bonds, notes, or other financial instruments at a discount to the face value or redemption value at maturity.

(xi)1099-PATR

If you belong to a co-op and received at least $10 in patronage dividends, expect to see Form 1099-PATR in your mailbox.

(xii)1099-Q

the Form 1099-Q is for reporting earnings in a 529 plan even though the earnings in a 529 plan are generally not subject to tax as long as earnings are used for qualified education expenses.

(xiii)1099-R

If you got distributions from a pension, retirement plan, profit-sharing program, IRA, or annuity, you might receive a 1099-R. (Remember, many retirement plans are tax-advantaged, so this form might be simple record-keeping on behalf of the IRS.) If you took a loan from your retirement plan, you might have to treat it as a distribution, which means it might be on this form, too, as well as permanent and total disability payments under life insurance contracts.

(xiv)1099-S

Anybody responsible for closing a sale or exchange of real estate furnishes this statement to you, reporting the proceeds. Again, the proceeds from the sale of your house or other real estate aren’t necessarily taxable, so do your homework.

(xv)1099-SA

This is the form you’ll receive if you took any distributions from your health savings account, Archer medical savings account, or Medicare Advantage. Remember, HSA and Archer distributions generally aren’t taxable if you use them to pay for qualified health expenses. So again, for many people, a 1099-SA is simply proof that the money left the account and went to you.

Form 1099-MISC is the most common and can cover just about any kind of income.  In fact, apart from wages, whatever you were paid is likely to be reported on a Form 1099. Companies big and small churn them out.

Social Security Number & Form 1099

How does the income is identified with its earner? It is easy. The social security number is the identification of income with the recipient of income. So, it is very easy for IRS to catch the discrepancies in income reported on the tax return and the income reported on IRS 1099 form. In fact, it is almost guaranteed that in case of discrepancies in income in tax return vis-a-vis 1099,  IRS will propose an audit or a tax notice. Read what IRS audit means.  Since the social security number is the common thread, it does not matter that issuer has your old address, the information will be reported to the IRS. It is better that payers have your correct address. so you get a copy of IRS Form 1099. You can update your address directly with payers. You should file an IRS change of address Form 8822. Read  a guide by IRS pdf

Should You Ask the Issuer for the 1099 Form?

How to get a 1099 form? Basically, the income, which you already earned and know, does not require a 1099 reference. However, the 1099 Form is a very good source to check for certain kinds of income that you may not know you have earned or a very likelihood of missing. For example dividend income or some miscellaneous income.

 What to do if you did not receive a 1099?

It is suggested that if you ask for it especially if don’t receive a Form 1099-R which is used for reporting on distributions from pensions, annuities, retirement, or profit-sharing plan. Better than asking an issuer for a Form 1099 is to get a transcript of your account from the IRS. It should show all Forms 1099 issued under your Social Security number.

In conclusion

 Form 1099 is a series of documents created by the Internal Revenue Service (IRS) that reports various types of income that a taxpayer may have received throughout the year, other than salary. The form is essential to the taxpayers, as it intimates them of the various kinds of income credited to them during the year. Once the income is on this form, it is known to the IRS, and any discrepancies between income reported on the tax return and income reported on the 1099 form will raise a flag while processing the return. There are sixteen types of Form 1099s, including Form 1099-MISC, which is the most common and covers any type of income. Each type of 1099 form is designed to report a specific type of income, and it is essential for taxpayers to understand these forms to ensure the accurate filing of their tax returns.

FAQ

What is a 1099 form?

A form that reports non-salary income received by a taxpayer, created by the IRS.

When does a 1099 form arrive?

Late January or early February.

What kind of information does a 1099 form include?

Information about various kinds of income credited to the recipient during the year, apart from their social security number.

What happens if there are discrepancies between income reported on a tax return and a 1099 form?

IRS will raise a flag while processing the tax return.

How many types of 1099 forms are there?

Sixteen.

What is the purpose of Form 1099-A?

To report mortgage lenders in case of mortgage cancellation or short selling of a home.

When is Form 1099-B issued?

If a taxpayer gets income from the sale of securities or through bartering exchange websites.

What is the purpose of Form 1099-C?

To report a credit card issuer forgiving any debt.

When is Form 1099-DIV issued?

When reporting dividends, except those on a share account at a credit union.

What is Form 1099-NEC?

A newly introduced form that is sent to freelancers or self-employed individuals instead of Form 1099-MISC in early 2021.