What Is a 1099 Form?
In plain English
A 1099 is an IRS information return that reports income paid outside of a traditional employer-employee relationship. Common varieties include 1099-NEC for freelance and contractor income, 1099-DIV for dividends, 1099-INT for interest, 1099-R for retirement distributions, and 1099-B for investment sales. Payers send copies to recipients and the IRS.
What Are the Most Common Types of 1099 Forms?
1099-NEC reports nonemployee compensation over $600. 1099-DIV covers dividends and capital gain distributions from investments. 1099-INT reports interest income. 1099-R covers distributions from pensions, annuities, and retirement accounts. 1099-B reports proceeds from broker transactions. 1099-G covers government payments like unemployment benefits and state tax refunds.
How Does Receiving a 1099 Affect Your Taxes?
Unlike W-2 income, taxes are not withheld from 1099 income. You are responsible for reporting all 1099 amounts and paying federal and state income tax plus, for self-employment income, the full 15.3% self-employment tax. Receiving 1099 income often requires making quarterly estimated tax payments to avoid underpayment penalties.
What Should You Do If You Receive an Incorrect 1099?
Contact the payer and request a corrected form. Do not ignore the error — the IRS receives a copy and will compare it to your return. If you cannot get a correction before the filing deadline, report the correct amount on your return and attach an explanation. Filing with a known error on an unchanged 1099 can trigger IRS notices.
Frequently asked questions
Do I have to report 1099 income if it is under $600?
Yes. The $600 threshold determines whether the payer must issue a 1099, but you are required to report all taxable income regardless of amount. Failing to report income the IRS knows about through other records increases your audit risk.
What is the deadline for receiving 1099 forms?
Payers must send most 1099s by January 31. Brokerage 1099-B and 1099-DIV forms may arrive as late as mid-February, and amended versions can arrive even later if payers receive corrected information from fund companies.
Keep exploring
Related terms
W-2 Form
A W-2 form reports an employee's annual wages and the taxes withheld by their employer. Employers must send W-2s by January 31 each year for use in filing federal and state tax returns.
Self-Employment Tax
Self-employment tax covers Social Security and Medicare contributions for self-employed individuals who do not have an employer withholding these taxes. The current combined rate is 15.3%.
Estimated Taxes
Estimated taxes are quarterly tax payments made to the IRS by individuals whose income is not subject to withholding. They are required for the self-employed, investors, and others who expect to owe at least $1,000 at filing.
Tax Filing Status
Your tax filing status determines your tax bracket thresholds, standard deduction amount, and eligibility for various credits and deductions. Choosing the correct status is one of the most impactful decisions in tax planning.
Withholding
Withholding is the portion of your paycheck your employer sends directly to the IRS and state tax authorities on your behalf throughout the year. It serves as a pay-as-you-go mechanism for income taxes.