What Is Form 1099? It Reports Payments Other Than Regular Salaries, Wages or Tips
A form 1099 is an IRS form used for filing taxes. It is used by companies to report payments made other than regular wages, salaries or tips (which are reported through a W-2 form). A 1099 is generated by the payer and must be sent to the payee by January 31st of each year, to reflect transaction amounts from the previous year.
There are many different types of 1099 forms, the one used depends on what the payment was for.
Here’s What We’ll Cover:
NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area.
Who Gets a Form 1099?
The most common 1099 form a company issues is a 1099-MISC. A business is required to fill it out for anyone they have paid $600.00 or more to, in a calendar year who is not an employee. For instance, if a company has paid 50 different contractors over $600.00, then it is required to fill out and provide 50 forms
It applies to payments made for:
- Freelance workers
- Cash prizes and awards
- Other income payments
- Medical and health care payments
- Attorney payments
- Crop insurance proceeds
- Cash payments for purchase of fish from commercial fisher
- Fishing boat proceeds
- Cash paid to an individual, partnership or estate from a notional principal contract
If a company withheld any taxes on contractor payment (regardless of the amount paid), then a 1099-MISC form must be issued.
The forms need to be distributed by January 31st (to reflect the amounts paid in the previous tax year) to the recipients of the money.
Other often-used 1099 forms include:
A 1099-K form is a required form third-party payment processors must file when the sales volume is greater than $20,000 and 200 transactions in a year. An example of a third-party payment processor is PayPal.
A 1099-K form is also required for debit, credit, and stored-value card transactions. “Store-value” cards are prepaid cards.
This form is required when distributions greater than $10 have been made from a:
- Pension plan
- Retirement plan
- Survivor income benefit plan
- Insurance contract
- Charitable gift annuity
- Profit-Sharing plan
- IRA (Individual Retirement Account)
A 1099-R is also required for permanent and total disability payments (under a life insurance contract).
Like the label implies, this is for interest earned in savings and checking accounts, as well as interest paid on savings bonds and treasury bills. The amount earned must be greater than $10.00.
What Is the Difference Between 1099 and W2?
A W-2 form is a form that a company must fill out for each of its employees. This form reflects wages, salaries, or tips.
The W-2 is sent by the company to both the employee and the IRS, and lists the amount of income the person earned, plus all the taxes withheld, including payments to Medicare and Social Security. The information from this form allows an employee to calculate his own personal income taxes, and to know if he owes any money, or if he should be receiving a refund.
A 1099 is a form a company generates for payments to everyone else. Typically, there are no deductions listed on these forms, because the person receiving the form is not an employee.
Can I Get a Tax Refund with a 1099?
A 1099 form is a document that reports income, which may increase taxes owing, not decrease them or result in a refund. As such, the 1099 form helps a taxpayer to complete his personal income tax return.
How Much Money Do You Have to Make to Get a 1099?
It depends on the type of income one is receiving.
Whether a company generates a 1099 form or not, does not change whether the individual or business (that received the money) should report it or not. All money earned must be reported to the IRS.
How Do I Send 1099 to IRS?
All versions of form 1099, with the exception of 1099-QA, should be filed electronically through the FIRE system. FIRE stands for “Filing Information Returns Electronically”. The use of FIRE is required by law when a company files 250 or more information return forms for a calendar year. However, the Internal Revenue Service encourages the use of FIRE for all filers, although paper is still an option if you are filing less than 250 forms.
When submitting 1099s, a company must also fill out a 1096 form. A 1096 form is a summary tax report to show the total number of forms being submitted, total amount being reported, and the total tax withheld.
Form 1099-QA applies to people with disabilities with an ABLE (“Achieving a Better Life Experience”) account, and it must be filed on paper.