About Form 1099
The IRS refers to Form 1099 as “information returns.” While it may seem like one form, there are a number of different versions of 1099 that report a variety of income you receive other than the remuneration from your employer. Below are a number of uses and situations where Form 1099 is needed.
The rise in the gig economy has flooded the American labor force with independent contractors. Positions such as freelance writers, consultants, and ridesharing drivers are hired on a contract basis. These positions differ from a salaried employee, where an employer would report annual earnings through a W-2: most likely using electronic withholding forms to aid in the process and limit massive amounts of paperwork.
If you are an independent contractor, each client that pays you at least $600 during the tax year will provide a Form 1099-MISC.
Government agencies are responsible for reporting income for payments to taxpayers. In this situation, agencies would use Form 1099-G in order to report income tax refunds on a state level. Furthermore, if you receive unemployment income, report this with a 1099-G in your taxable income.
If you decide to withdraw money from your IRA, you should know it’s usually taxable. In this instance, you will receive a Form 1099-R that reports your total withdrawals for the year.
Form 1099-C is used to report any amount of debt that has been canceled by a creditor. This type of situation is usually prevalent when a credit card company reduces the amount of debt in your outstanding balance. In this example, the credit card company would provide a 1099-C.
Form 1099 is used in a variety of situations, from independent contractors to recording unemployment income and IRA withdrawals. What experience have you had with Form 1099? Share with us on PayrollTalk!