1099 Tax Form – What Is It?

If you received a 1099 tax form, save it. You’ll need it when filing your taxes.

If you received a 1099 form in the mail, you may not be sure what it is or what to do with it. Whatever you do, don’t throw it out. You’ll need the information listed on the 1099 when filing your taxes during tax season.

1099 forms are used to report income not included on a W-2 [Wage and Tax Statement], in other words income that is not included in wages, salaries, and tips.

The 1099 is most commonly used to pay independent contractors, such as freelancers and consultants, who are not official employees of a company.

If you received a 1099, you’ll need to report the earnings listed as self-employment income on a business tax return. RapidTax is here to help.

Variations of the 1099 Form

There are 24 different variations of the 1099 form, covering far more than just nonemployee compensation. Different 1099 forms report different types of income from interest and dividends to real estate sale proceeds and debt cancellation. Some of the most common 1099s include the following;

• 1099-B [Proceeds from Broker and Barter Exchange Transactions] records all stock transactions and helps you report capital gains to the IRS when you file your return. Use your 1099-Bs to fill out Form 8949 [Sales and Other Dispensations of Capital Assets] as well as Schedule D [Capital Gains and Losses].
• 1099-C [Cancellation of Debt] is given to a debtor when a government agency or financial lender has discharged a debt. The amount discharged is then considered taxable income which must be reported to the IRS.
• 1099-G [Government Payments] reports payments from the federal, state, and local government including unemployment compensation, state and local income tax refunds or offsets, and alternative trade adjustment assistance (ATAA) payments. Note that unemployment compensation is considered taxable income and all the money reported on a 1099-G must also be reported on your tax return.
• 1099-MISC [Miscellaneous Income] is the form that reports various types of miscellaneous income not included in wages, salaries, and tips. Payments for services (including parts and materials), rents, prizes and awards, proceeds paid to attorneys, and medical and health care payments in excess of $600 made to vendors, subcontractors, and independent consultants all require a 1099-MISC.
• 1099-R [Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.] reports distributions of $10 or more from the aforementioned sources. Generally, payments subject to withholding of social security and Medicare taxes are not reported on a 1099-R, nor are amounts totally exempt from tax, such as workers’ compensation and VA payments.

What To Do With a 1099 Form You Received

If you did freelance or contract work, the person who paid you is required to send you a copy of the 1099.  You must report this income on your tax return – the IRS already knows about it, so it’s unlikely you will be able to hide it.

Not only do you need to report this income as self-employment income when filing, you’ll also need to pay tax on it.

Federal and state income taxes as well as social security and Medicare taxes will are generally not withheld from the paychecks given independent contractors and thus are not reported on your 1099. Independent contractors are responsible for paying this tax.

How to Report Income Listed on a 1099

The law requires you to report and pay tax on all income you received. Reporting income listed on a 1099 form can be complicated if you’re doing it on your own. Afterall, you’ll need to file a business tax return, since you’re considered “self-employed” in the eyes of the IRS.

Rather than paying high fees to an accountant, you can get professional help and file your taxes without the hassle of doing it yourself with RapidTax.

RapidTax is easy. After creating an account, you’ll simply plug the information from your 1099s and other tax forms into our tax software. We’ll also give you the option to enter any possible expenses you incurred to reduce your total tax liability!

Tax Season 2015 is around the corner. Before it’s time to file your 2014 Tax Return, you can get caught up on any late tax return with RapidTax.