IRS Form 1099 is a crucial tax document used to report various types of income received outside of traditional employment. Now that we know the basics of IRS Form 1099, we can take a closer look at the different types of 1099s you can receive. Remember, if you received any income outside your employer, you might receive a 1099. While most types of Form 1099 are not commonly received, there are a handful that you are likely to come across at some point. Whether you are an independent contractor, an investor, or someone who has received unemployment benefits, understanding the different types of 1099s can help you stay compliant with tax laws and avoid surprises during tax season. Here’s an overview of the different types of Form 1099.
Common Types of 1099
Receiving a 1099 is more common than you’d think. You can receive a 1099 if you have a side gig, earn interest on a bank account, or sell stocks. Let’s review the most common types of 1099.
1099-MISC: Miscellaneous Income
The 1099-MISC is used to report various types of income that do not fall under the category of non-employee compensation. This includes rent payments, royalties, awards, medical and health care payments, crop insurance proceeds, attorney payments, legal settlements, and others. Businesses that pay at least $600 in rent to a landlord, for example, must issue a 1099-MISC.
Consider a scenario where a business leases office space from an independent property owner and pays $1,200 per month in rent. By the end of the year, the business has paid $14,400 in total rent. The landlord should receive a 1099-MISC documenting these payments, which they must report as rental income on their tax return.
1099-NEC: Nonemployee Compensation
One of the most frequently issued 1099 forms is the 1099-NEC. The 1099-NEC form is used to report non-employee compensation, including independent contractors, freelancers, sole proprietors, and self-employed individuals. If you received $600 or more in non-employee compensation during the tax year, you should receive a 1099-NEC. This form is used to report payments made for services rendered. These might include consulting fees, professional services, and other types of compensation.
For example, a small business hires a freelance graphic designer to create a new logo and pays them $1,500 over the course of the year. Since the total payment exceeds the $600 threshold, the business must issue a 1099-NEC to the designer and report the payment to the IRS. Unlike traditional employees, independent contractors do not have taxes withheld from their earnings. This means they are responsible for making estimated tax payments throughout the year to cover income tax and self-employment tax obligations.
1099-INT: Interest Income
Banks, credit unions, and financial institutions issue 1099-INT forms to individuals who earn interest income. This includes interest from savings accounts, certificates of deposit (CDs), and U.S. Treasury bonds. If you earned more than $10 in interest income, the financial institution is required to disburse a Form 1099-INT. The form will go both to you and the IRS.
Suppose a taxpayer holds a high-yield savings account that generates $750 in interest over the year. The bank will send them a 1099-INT, which must be included on their tax return as taxable income. Even if the taxpayer does not receive the interest as cash—such as in the case of a reinvested bond—it still must be reported.
1099-DIV: Dividends and Distributions
Form 1099-DIV is used to report dividends and distributions that are paid to you during the tax year, as well as any federal income tax withheld. This can include ordinary dividends, which are paid out of a company’s earnings and profits, qualified dividends, capital gain distributions, and non-dividend distributions. It does not include any dividends that you accrued through tax-sheltered retirement accounts. You will typically receive a 1099-INT if you received at least $10 in dividend income.
For example, an individual who owns shares in a dividend-paying stock earns $1,200 in dividends throughout the year. Their brokerage firm will send them a 1099-DIV summarizing these payments. If some of the dividends qualify for a lower tax rate, they will be classified as “qualified dividends” on the form.
1099-K: Payment Card and Third-Party Network Transactions
Form 1099-K is meant to track payments made through third-party networks, such as PayPal, Venmo, or credit card transactions. This form is issued when total transactions exceed a specific threshold. For tax year 2024, the threshold for reporting is $5,000, meaning businesses or individuals who receive more than this amount through third-party networks will receive a 1099-K in 2025. The threshold for tax year 2025 is $2,500, and it will decrease to just $600 in 2026.
For instance, a small bakery that accepts credit card payments through Square receives $5,000 in transactions over the course of the year. Square will issue a 1099-K to report this income. If the bakery owner also accepts cash payments, those earnings must be self-reported, as they will not be included on the 1099-K.
Other Common Types of 1099
Now let’s look at some other types of 1099. These are not the most common, but you are likely to come across these at some point in life.
1099-B, Proceeds from Broker and Barter Exchange Transactions
This form reports the sale of stock, bonds, and other securities through a broker, as well as barter exchange transactions. It includes details on the sale price, cost basis, and whether the transaction resulted in a capital gain or loss. These transactions must be reported even if you had a loss or broke even.
1099-G, Certain Government Payments
This reports payments you received from government agencies, including unemployment, tax refunds, taxable grants, and more. Since unemployment income is generally taxable at the federal level, recipients may need to pay taxes on these benefits when filing their return.
1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
This reports distributions from annuities, profit-sharing plans, retirement plans, IRAs, insurance contracts, or pensions. Withdrawals from these accounts may be subject to income tax, and in some cases, early withdrawals before age 59½ may incur additional penalties. You should consult with a tax professional about whether you will owe tax on these distributions.
1099-S, Proceeds from Real Estate Transactions
1099-S reports the sale or exchange of real estate. The form reports the gross proceeds from the sale, which may be subject to capital gains tax depending on the seller’s circumstances. If the property was your primary residence for two of the five years before the sale, then up to $250,000 of the profit is exempt from taxes. This amount increases to $500,000 for married couples filing jointly.
1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
This form reports distributions made from a health savings account (HSA), Archer Medical Savings Account (Archer MSA), or a Medicare Advantage Medical Savings Account (MA MSA). Distributions can be taxable if they were used to pay for qualified medical expenses, if they were not rolled over in some cases, if excess contributions were made, and other scenarios. You should consult with a tax professional about whether you will owe tax on these distributions.
Less Common Types of 1099
Now let’s review the less common types of 1099. Remember, even if these are less common, the IRS is still diligently tracking which tax forms are reported. Be sure to include all 1099 income on your tax return.
1099-A, Acquisition or Abandonment of Secured Property
1099-A reports foreclosures on properties. You may be liable for capital gains tax and income tax for any unpaid foreclosed mortgage balances.
1099-C, Cancellation of Debt
This form reports discharged, forgiven, or canceled debt. This can include your property foreclosure or forgiven credit card debt but typically excludes debt discharged in bankruptcy. You will need to claim the amount reported on your 1099-C as taxable income.
1099-CAP, Changes in Corporate Control and Capital Structure
Form 1099-CAP reports the amount of cash, stock, or property received after a significant change in the company’s control or capital structure.
1099-H, Health Coverage Tax Credit (HCTC) Advance Payments
This reports any advance payments of qualified health insurance payments you received. If you qualify for trade adjustment assistance (TAA), alternative TAA (ATAA), reemployment TAA (RTAA), or Pension Benefit Guaranty Corporation (PBGC), you might see this form.
1099-LTC, Long Term Care and Accelerated Death Benefits
Form 1099-LTC reports payments made under a long-term care insurance contract. This includes accelerated death benefits, or benefits received before death because the policyholder has been deemed terminally ill by a doctor. The amount shown on the 1099-LTC are generally tax-free but are required to be reported to the IRS.
1099-LS, Reportable Life Insurance Sale
This form reports the amount paid to you from a life insurance sale.
1099-OID, Original Issue Discount
1099-OID reports $10 or more of income received when bonds, notes, or certificates of deposit (CDs) are sold at a discount from their maturity value.
1099-PATR, Taxable Distributions Received from Cooperatives
This reports at least $10 in patronage dividends and other distributions from a cooperative (co-op) in the prior year.
1099-Q, Payments from Qualified Education Programs
1099-Q reports total withdrawals from qualified tuition programs (QTPs) like 529 plans or Coverdell educational savings accounts. This amount may be taxable, depending on how the funds were used.
1099-QA, Distributions from ABLE Accounts
Form 1099-QA reports distributions from an Achieving a Better Life Experience (ABLE) Account for special needs individuals with a disability. These funds are not taxable if you used them to support a disabled individual.
1099-SB, Seller’s Investment in Life Insurance Contract
Form 1099-QA reports distributions from an Achieving a Better Life Experience (ABLE) Account for special needs individuals with a disability. These funds are not taxable if you used them to support a disabled individual.
What to Do If You Receive a 1099
If you receive a 1099, carefully review it for accuracy. If the information is incorrect, request a correction from the issuer. Failing to report 1099 income can result in IRS penalties, so ensure all taxable amounts are included in your return. Maintaining proper records throughout the year can help simplify tax filing. If you have multiple 1099s or complex income sources, consulting a tax professional can help you navigate potential deductions and minimize tax liability.
Tax Help for Those Who Receive 1099s
The types of Form 1099 and the accompanying filing requirements can quickly become complicated. You should always consult with a tax professional if you are unsure about your tax filing requirements. Remember, even if you do not receive a 1099 for income earned, it’s still your responsibility to include it in your taxable income. Not doing so can be a major red flag to the IRS and can result in an audit. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
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