Full-time employees receive a W-2 form to file their taxes while independent contractors file their self-employed taxes using the 1099s. Maybe you are an Uber driver or a freelance writer, or perhaps you are working for yourself. Regardless of what you do and who you are, so long as you are self-employed, it’s best that you know more about this form and how to file it properly.
What is a 1099 Tax Form?
It’s a form that shows that an entity or a person paid or gave you money. The payer generates the 1099 and sends copies to you and the IRS. It shows how much money you earned from a client in a given year.
The IRS requirement is that every client you paid $600 and above to complete a 1099 and send the copy to you. But if one is a full-time employee to a particular company and has a side hustle, they could include W-2 and 1099 with their returns. Even if you don’t receive a form from a client, you’ll still need to indicate that income during tax season, only that you won’t receive a 1099 for it.
Types of 1099 Forms
There are several types of 1099 service forms, and the most common one is 1099-MISC, which is mostly used by independent contractors, interns or freelancers. It reports wages paid to these kinds of workers. There are also other specific situations in which the 1099-MISC might be required, such as cases of scoring credit card benefits that are taxable.
The MISC also includes rents, royalties, and awards. It will list your name, address, and social security number as well as the type of work you did for a company and the money you were paid during the year.
- Additional forms issued throughout the year on an individual basis include:
- 1099-DIV- filed for accounts that earned significant dividends.
- 1099-G- issued by the government to people who’ve received unemployment benefits.
- 1099-C- filed by a lender when the canceled student loan is taxable.
- There are also other types, but you don’t need to worry about selecting your 1099 as it’s sent to your mailbox by the employer.
Who Should Use a 1099 Form?
Since these forms are a means of communication to the IRS, both you and your client will use them to report about the business. The entity or the person, who pays you at least $600, should send you the form latest on January 31st. However, should you not receive the 1099, you still need to report the income on your tax.
What to Do with a 1099 Tax Form?
A 1099 helps you figure out how much cash you earned throughout the year and the type of income it was because you need to indicate that particular income in different places on your return depending on what kind it was.
How Do I File 1099 Forms?
Your clients will send you these forms, and all you need to do is include them with your tax return and report on your other tax forms on how much money you received from the clients.
For example, if you are an independent contractor and you’ve received a 1099-MISC detailing $30,000 worth of work, you’ll report that figure on your schedule C form.
You’ll then be able to compare the expenses of your business and the profit it’s making.
An employer should send the appropriate 1099 forms by January 31st to both the employee and the IRS, although sometimes the deadlines differ depending on the state. It’s essential that if you worked for a person or an entity, you confirm with your state the date by which 1099 forms and other tax documents are due.