- A Form 1099 is a tax document, also known as an "information return," which helps business report certain business transactions, generally income-related, to the IRS. The requirement to file these documents is an IRS mandate. Persons or businesses who are required to file a 1099 with the IRS are also required to provide statements to the recipients of the income. These returns must be filed electronically if they number more than 250.
- A Form 1099-Misc. is one of many different types of 1099s. Usually, you will receive a 1099-Misc if you have been paid more than $10 in royalties, or at least $600 in rents, services, prizes, awards and other income payments that are not wages. Additional payments listed on a 1099-Misc include fishing boat proceeds, medical and health care payments, crop insurance proceeds, cash payments for fish and gross proceeds paid to an attorney.
- The amounts reported to you on your 1099 are also reported directly to the IRS by the payer of your income. Thus you must file any information you receive on your 1099 with your taxes so your records match. The type of 1099 you receive can affect the way you are taxed on the income, so be sure that you follow the IRS instructions correctly and file your 1099 income in the correct boxes on your Form 1040.
- Most taxpayers receive a Form W-2 at year-end, which lists the wages they were paid by an employer. If you work as a freelancer, or if you are a contract worker rather than an employee, you will usually receive a Form 1099-Misc. instead of a W-2.
- Although W-2 wage recipients usually have some tax withheld from their paychecks, 1099-Misc. recipients often do not. Check box 4 of your 1099-Misc. to see if any federal taxes have been withheld. If you are a contract employee, and you anticipate receiving future 1099s, you should talk to a tax adviser about possibly paying estimated taxes.
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