If you ever worked as an independent contractor, you’re likely familiar with 1099 forms. Simply stated, a 1099 form is a tax form you receive from a person, company, or organization that you did work for. The primary difference between this and a W2, is that people who receive W2 forms are considered “employees” as opposed to independent contractors. Whereas people who receive W2 statements often have federal and state income taxes withheld from their paychecks, most individuals who receive 1099 forms often do not have taxes withheld.
If you’re a small business owner or have a rental property and you’ve made payments to someone for services rendered during the 2021 tax year (and that person is not your employee) you may need to file a 1099 form with the IRS.
According to the IRS, this form needs to be filed if:
- Payments made totaled at least $600
- Cash payments for aquatic life (or fish) made to someone who engages in the business of catching fish
- Payments made to law firms, providers of legal services, and attorneys
Types of 1099 forms that taxpayers may receive
You should also be aware that 1099 forms aren’t just for people with self-employment income. Examples of other types of 1099 forms include:
- 1099-INT: This form is sent to all taxpayers who earned more than $10 in interest from a bank, brokerage firm, or other type of investment firm during any given tax year.
- 1099-DIV: This form is sent to individuals who earned dividend income during a tax year.
- 1099-G: This form is sent to individuals who received financial assistance from federal, state, or the local government. For example, people who received unemployment benefits will receive a 1099-G.
- 1099-R: This form is sent to taxpayers who received distribution payments from certain annuities, retirement plans (i.e. pensions / IRAs), or insurance contracts.
- 1099-B: This form is sent to taxpayers who received income via the sale of stocks, bonds, commodities, or bartering transactions.
- 1099-S: This form may be issued to individuals for certain real estate transactions. However, some of these proceeds may be tax exempt (depending on your financial situation.)
- 1099-NEC: This form is sent to individuals who received non-employee compensation from a person, business, or organization, in excess of $600.
- 1099-MISC: This form is sent to people who received payments that fall outside of the scope of other 1099 forms. For example, people who received money from awards and prizes may receive a 1099-MISC.
If you have questions about whether you need to file a 1099 form based on payments made, or if you have questions about whether you need to file a 1099 form based on payments received, we can help. Call Hughes, Snell & Co., PA today to speak with an expert.