1099 Tax Forms
The IRS refers to most 1099 tax forms as information returns because they are used to report income other than wages, salary and tips to both taxpayers and the IRS. 1099 tax forms usually involve payments made in the course of a trade or business to any non-employees and to some contractors. In general, businesses are required to file such forms with the IRS and must also send a copy to the recipient if required.
Types of 1099 Tax Forms
The 1099 family of forms is one of the most diverse groupings among IRS tax forms. Depending on the type of payment made, the tax filing requirements vary. Here’s a list of the different 1099 tax forms you may run across as you conduct business:
1099-MISC
The 1099-MISC form is used to report miscellaneous income from both individuals and businesses. This form is commonly used to report contracted labor payments made to unincorporated individuals, such as independent contractors. Payments such as these must be reported on the 1099-MISC form if they exceed $600 per year. Non-incorporated businesses that receive the 1099-MISC form should report the income on their business tax return.
1099-INT
The 1099-INT form is used to report interest earned from investments such as savings accounts and certificates of deposit (CDs). To bring in more revenue, the IRS requires financial institutions to report payments of more than $10 in interest to both the IRS and the recipient.
1099-DIV
The 1099-DIV form is used to report income earned from dividend payments. If a taxpayer earns more than $10 in dividends over the course of a year, then a 1099-DIV is issued. This form is also issued to shareholders by a C corporation or a mutual fund to report dividend payments throughout the year.
1099-R
The 1099-R is used to report distributions from pensions, annuities, retirement, or profit-sharing plans, IRAs, insurance contracts, or other types of arrangements.
1099-G
The 1099-G form is used to report state and local tax refunds, lottery and gambling winnings, or state unemployment compensation.
1099-S
1099-S forms are used for real estate transactions of $600 or more. This includes any sale of real estate that involves a mortgage and any exchange of real property.
1099-C
The 1099-C form is used to report the cancellation of debt of $600 or more. This may include debts such as credit card debt, car loans and student loans.
1099-B
The 1099-B form is issued when a taxpayer sells stocks, bonds or other investments. Brokers are required to issue 1099-B forms when they are involved in any sale of $10 or more in these types of investments throughout the year.
Reporting Requirements for 1099 Tax Forms
All 1099 tax forms must be issued by January 31st of the year following the calendar year it pertains to and must be reported to the IRS by March 31st of the same year. Additionally, copies of the 1099 tax forms must be sent to the recipient.
Deadlines and Non-Filing
The deadline for filing 1099 tax forms is generally January 31st. This is an important deadline, as the IRS generally will not accept 1099 tax forms after this date. If a taxpayer fails to file the 1099 form by the due date, the IRS will assess a penalty of $50 for each form in which the taxpayer failed to timely file.
Penalties for Improper 1099 Filing
Not only may the taxpayer who fails to file a 1099 form face a penalty of $50, penalties may also be imposed on the recipient. The penalty for failing to report income on a 1099 form is equal to 10-25% of any unpaid tax due to the IRS, depending on the number of delinquent 1099 forms.
1099 tax forms play a major role in the filing process for the IRS. Depending on what type of payment is made, one of several types of 1099 tax forms may need to be completed. Businesses and taxpayers must ensure that their filing and reporting of 1099 forms is done in compliance with all IRS rules and deadlines, lest they risk large fines and penalties.