Who Must File a 1099?

Payers must file 1099s with the IRS and their payees must report this information on their tax returns

There are different types of 1099s for different kinds of payments. The most common is a 1099-MISC. It’s used to report miscellaneous income. 1099-MISCs are only used to report payments made in the course of trade or business, not personal payments.

Payers must file 1099s with the IRS to make sure people are accurately reporting their income. Payees will then receive a copy of the 1099 in the mail. They must then use this information to help complete their tax return. If you are a recipient, you don’t have to file a 1099, you just have to report this information on your return.

You must file a 1099-MISC if you:

• paid someone $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest.
• paid someone $600 or more in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish, etc.
• made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
• withheld any federal income tax under the backup withholding rules.

Most commonly an individual or a business will end up filing a 1099-MISC for a freelancer or independent contractor (in other words, someone who isn’t an official employee) for work they did. Likewise, if you are the freelancer or independent contractor, you will receive a 1099-MISC in the mail from that payer detailing the income you received from them.

What should not be reported on 1099-MISC?

There are certain payments that do not need to be reported on a 1099-MISC, though the person who receives them may have to report them as taxable income. These include:

• payments to corporations (though there are exceptions to this exception)
• payments for merchandise, telegrams, telephone freight, etc.
• rent to real estate agents
• wages paid to employees (which are reported on a W-2)
• military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (also reported on a W-2)

If you’re an official employee of the company, your pay will not be reported on a 1099. Instead, you should you will receive a Form W-2 [Wage and Tax Statement] in the mail.

Though 1099-MISC is the most common, there are many other types of 1099 forms that perform the same essential function but each report a different type of income.

If you’ve lost a 1099 from a previous year, you can retrieve a copy of the form from the IRS. Then you will have all of the information you need to file your 2024 tax returns or tax returns from an even earlier year.

Photo via David Reber’s Hammer Photography on Flickr. 

This entry was posted on Wednesday, February 13th, 2013 at 7:56 pm and is filed under Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.