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Many Americans have more than one source of income.
In 2017, more than 7.5 million Americans had multiple jobs, according to the Bureau of Labor Statistics. But job wages are far from the only source of income you might have to report on your federal income tax return. You may also have interest, dividends, capital gains, retirement plan distributions and other income that you’ll need to pay tax on.
Every year, taxpayers find their mailboxes filled with forms they’ll need to file their income tax returns. Among those forms might be a 1099. The 1099 is a document that helps you properly report income other than job wages or salary.
So if you get a 1099 form, what do you need to do with it? We’ll help you figure that out.
What is a 1099 form?
A 1099 is a type of IRS form known as an “information return.” Another information return form that might be more familiar is the W-2 — the form employers send to their employees every year documenting their individual wage, salary and tax withholding info.
A 1099 works the same way, but for other kinds of income. Entities such as banks and investment brokers send 1099s to their customers every year, documenting their earnings and tax withholding info for things like interest, stocks and retirement distributions.
What’s in a 1099 form?
The 1099 forms may look complex — most IRS forms do. But they’re actually pretty simple. They generally include …
- Your name, address and taxpayer ID number
- The name, address and taxpayer ID number of the company or individual who issued the form
- The amount of income paid to you during the year in the appropriate box, based on the type of income you received
- The amount of federal or state income tax withheld on that income, if any
What are the different types of 1099 forms?
As of 2018, there were 20 kinds of 1099 forms. Here are some of the more commonly used 1099s:
The 1099-INT form is used to report interest income. If an individual, bank or other entity pays you at least $10 of interest during a calendar year, that entity is required to issue a 1099-INT to you. It also has to give you a 1099-INT regardless of the amount of interest payment if it withheld from you — and didn’t refund to you — federal income tax under backup withholding rules. It also has to give you one if it withheld and paid any foreign taxes for you.
Generally, the 1099-DIV form is used to report stock or mutual fund dividends and other distributions of $10 or more. The requirements for who has to issue a 1099-DIV and under what circumstances are the same as those for a 1099-INT.
If you sell shares of stock or other securities during the year, your broker or exchange agent is required to send you a 1099-B.
The 1099-B includes:
- A description of the asset sold
- The date you bought it (if your broker has that information)
- The date you sold it
- How much you received from the sale
- Your cost basis in the asset (if your broker has that information)
- Whether the sale resulted in a long-term or short-term gain or loss
Long-term gains or losses may occur when you’ve owned the asset for more than one year before sale. Long-term capital gains are generally taxed at a lower rate than short-term gains.
A 1099-MISC form is a catchall form for many other types of income you might receive. For example, if an individual or entity pays you at least $10 in royalties or at least $600 in rent, prizes or awards, or other income not covered by a different 1099 form, that person or entity is required to send you a 1099-MISC.
If you perform any work as a freelancer or independent contractor, you should receive a 1099-MISC to report your earnings for that work instead of a W-2.
Form 1099-R is used to report distributions from retirement accounts such as 401(k)s and IRAs. This form is used to report taxable distributions from retirement accounts, but it is also used to report non-taxable distributions, such as a rollover of funds from a former employer’s 401(k) plan into an IRA. A non-taxable rollover is typically indicated by a code G in Box 7 of the form.What types of income are taxable?
How do I report 1099 income?
When you receive a 1099 form, compare the income reported on the form to your own records. If the form shows more income than you received during the year, you’ll want to call the issuer to resolve that difference.
This is important because a copy of that 1099 is also sent to the IRS. The IRS compares the 1099s they receive on your behalf with the income reported on your tax return. If your tax return is missing any of the income included on those 1099s, you can expect to receive a notice from the IRS asking you to either explain the discrepancy or pay additional tax on that unreported income.
If the information on the 1099 is correct, then you simply report that income on your return:
- Interest and dividend income are generally reported on 1040 form Schedule B
- Capital gains and losses are reported on Schedule D
- Income from freelancing or working as an independent contractor is reported on Schedule C
- Retirement distributions are reported on form 1040 (line 4a and 4b on Page 2, according to a draft version of the 2018 Form 1040)
What happens if I don’t get a 1099?
If you know you should receive a 1099 but it doesn’t appear, don’t panic. Sometimes 1099s are issued late or get lost in the mail. In some cases, the entities that should have reported your 1099 income are unaware of the requirement. If you know how much income you received, simply report that amount on your return and file it as usual.
You can also try contacting the entity to find out whether it issued a 1099 and ask for a duplicate, if necessary. If that doesn’t work and you need the form, you can contact the IRS for assistance at 800-829-1040.
Keep in mind that even if you don’t receive a 1099 or you were paid less than the minimum amount to trigger a 1099 being issued, you are still required to report the income on your return. For that reason, it’s a good idea to keep track of the types and amounts of income you receive during the year rather than wait for those 1099s to come in.
Having more than one source of income can be a good thing, as long as you don’t overlook your responsibility to pay federal income tax on all your taxable income.
Those 1099s help you complete your federal income tax return, but they also help the IRS monitor your tax obligations.