What is a 1099?
- 7 days ago
- 5 min read
When it comes to filing taxes, there is a large variety of forms required for business owners, and you’re probably asking yourself an endless number of questions. What is a 1099? Who is eligible for the 1099? How to file these forms? When to file them? What do they mean? There is a lot to understand, but we are here to help you figure it all out.
Accurately filing taxes may have a lot of different parts, but a great place to start is with the 1099.
How do I use the 1099?
The IRS uses two different forms to report on income: a W-2 and a 1099. You have more than likely heard of a W-2, which is used to report on income received during the year. The 1099 does the same thing. The difference all comes down to the type of worker the recipient is and how they made their income. As a business owner, you need to know which form each person under your employment requires. And more specifically, who gets a 1099 from your business?
The 1099 reports on earnings that were not subject to withholdings during the year. This means that they had contracted work, are self-employed, or that they earned their income in some other way other than a traditional salary, and now they need to pay taxes on that income. Which means they need a 1099 to report on just how much they made throughout the year.
Which 1099 Form Do I Need?
There's more than one type of 1099, and knowing the difference matters. There are many 1099 forms. Two of the most common 1099s are the 1099-NEC and the 1099-MISC. The difference between these two forms (and all of the other variations of the 1099) is how the income was earned. To determine which 1099 form you need, see the descriptions below:
● 1099-NEC reports income paid to an independent contractor or freelancer. It’s not a primary or permanent source of income.
● 1099-MISC represents income from something such as a prize/award, rent, royalties, etc.
Some of the confusion between these two lies in the fact that they both used to fall under the 1099-MISC. However, since 2020, the IRS has split the 1099-MISC into two. One for what is considered self-employed work and the other for what they consider miscellaneous. Most businesses will likely be sending out 1099-NECs (since it is this 1099 form for an independent contractor), but just in case, we will talk about some of the other kinds of 1099s as well.
Because there are so many ways to earn income, there are also many different kinds of 1099s to report on those earnings. In addition to the 1099-NEC and the 1099-MISC, there are also the following 1099s.
1099-B for income from a broker or barter exchange
1099-CAP for changes in capital structure
1099-DIV for dividends
1099-G for government payments
1099-H for health insurance payments
1099-INT for interest from a savings account
1099-K for payments from a third-party processing (involving an online business)
1099-LTC for income from life insurance or other long-term care insurance
1099-OID is for bonds issued at a lower than face value
1099-PATR are from profits received from a cooperative
1099-Q for distributions from tuition programs.
1099-QA is for retirement benefits
1099-R are profits from retirement plans
1099-S is for proceeds from a sale
1099-SA is for funds from a health care savings plan
SSA-1099 tracks the benefits paid and repaid from Social Security
There are indeed many kinds of 1099s, and there is a variety of people who are eligible for a 1099. Knowing which 1099s are out there is a great first step in ensuring you know how to file your taxes. The next step is knowing who is issued a 1099.
Who should get a 1099
Businesses have many different people under their broad umbrella of employment, so it can be hard to know who gets a 1099 from your business. As stated above, it depends on how they are paid and what kind of employee each person is.
If someone is to receive a W-2, it is because they are an employee. This means that part of their income is withheld for taxes and paid by their business. Typically, some of an employee’s income is also withheld for the purpose of paying for health insurance or a retirement plan.
You may have heard something about how only people who earn more than $600 per year need to receive a 1099. However, this number was recently changed in a new law termed the One Big Beautiful Bill Act (OBBA). It states that starting in the 2026 tax year, only people earning more than $2000 a year will need to receive a 1099. This higher threshold is meant to more accurately reflect how much a person is earning in a year. The stated $2000 is flexible, meaning that it will change to reflect inflation starting in 2027. Anticipate those coming changes.
How and when do recipients need a 1099?
The 1099 should be sent to both the IRS and the recipient to ensure accurate filing. Depending on how you wish to send out your forms, the date the IRS needs the 1099 can change. For physical forms, send them to the IRS by February 28. For electronic copies, send them by March 31. Each 1099 form should include two copies, A and B. A goes to the IRS, and B goes to the recipient. To provide ample time for a recipient to file their taxes, send them their 1099 form by January 31.
For example, to send out a 1099-NEC form for an independent contractor physically, you should have Copy B in the mail by January to the independent contractor and Copy A in the mail for the IRS by February 28. These steps are in place to ensure everyone’s taxes can be filed smoothly.
We understand that there are many kinds of 1099, to determine who is issued a 1099 form and which one they need, consult the list above. However, most businesses will likely just be using the 1099-NEC and the 1099-MISC as they are the most common.
Taxes involve many different forms that all come with their own laws and needs. HK Advisory Group PLLC is here to help you learn about which forms each of your employees needs, how to send them, when to send them, and more.
Our exceptional staff is here and ready to help you file your taxes as smoothly and accurately as possible. Do not hesitate to contact us with any further questions or to help you file your taxes today.
FAQs
Will you help me file my 1099s?
Absolutely! We are more than prepared to help you tackle your business’s tax needs, including the 1099.
Is there a limit to how many 1099s you will help me with?
Not at all! We can discuss your needs, what you want help with, and we can decide what to do from there. If that’s just one 1099, great. If you need help with multiple forms, that’s great too. We are here and ready to tailor our work to your needs.
How much will you charge me to help me file my 1099s?
Our business returns start at $600. Prices are personalized to you and your needs so that we can give you a better idea after a consultation. We believe in being clear and upfront, so you will not find any hidden fees here.
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