If you are a business owner working with non-employee professionals, independent contractors, or freelancers working in the US, then you must be aware of Form 1099 and its various types. It is a mandatory Form that needs to be filed and used for paying taxes.
What is Form 1099?
The Form 1099 is a tax form and one of the IRS documents which is used to report the payments made to the contractors or freelancers if you are the business owners. As the freelancers and contractors, who received the money, the individuals needs to reconcile and review the payments and amount made to them.
Form 1099 is basically an information return which records the reportable transactions and can be used for miscellaneous income reporting. These incomes include Rental Property Income, Dividends, Health Coverage Tax, Real Estate Brokerage, Interest income and other certain Govt. Payments. Based on these incomes, the type of forms differ which are listed as follows:
Different Types of Form 1099
1. 1099-A (Acquisition or Abandonment of Secured Property)
Form 1099-A is issues through a lender when the lender receives an interest on assets which is supposedly in complete or partial delight of the debt. Also, if the lender has motive to understand that the property has been abandoned, Form 1099-A is filed. The recipient received Form 1099-A by January 31 for the previous Calendar Year transactions.
2. 1099 – B (Proceeds from Broker and Barter Exchange Transactions)
Form 1099-B is used to record property income initiated and closed via a dealer or different trade system. For maximum taxpayers, Form 1099-B is used to record the sale of securities including stocks, bonds, and mutual funds. A copy of 1099-B must be mailed to all the clients by February 15 by the broker or barter exchange for the previous Tax Year.
3. 1099- C (Cancellation of Debt)
Form 1099-C is used to cancel the debt like Foreclosure, Repossession, Loan modification or return of property by lenders. This form needs to be mailed to the recipients by the January 31 of the next calendar year, and then e-filed by March 31 with the IRS.
4. 1099-CAP (Changes in Corporate Control and Capital Structure)
1099-CAP is used to make changes in control or capital structure via IRS like Transfer assets, Consolidation, corporation changes etc. Like most of the 1099 forms, this needs to be filed and sent to the recipients by January 31 if the changes in control or capital structure have been made in the previous year.
5. 1099-DIV (Dividends and Distributions)
For Form 1099-DIV, there is a threshold limit. The taxpayers can only use this form when they receive/sent exceed 10$ as Dividends or Distributions. Both parties must fill this form by IRS. These forms are sent by the brokerage firms to the taxpayers by the January 31. Remember, if you are filing it via mail then the deadline is till February 28, and the e-filing to IRS must be done by March 31.
6. 1099-G (Government Payments)
Form 1099-G is a multi-purpose form, it can be used for payments made by various Government bodies including the Federal, State, and Local Govt. This report is mainly used to report unemployment, Tax refunds/Credited, etc. The department can not issue this form after January 31 as per the IRS regulations.
7. 1099-H (Health Insurance Advance Payments)
A qualifying medical health insurance companies that received HCTC advance payments from the Treasury Department on behalf of eligible recipients uses Form 1099-H to document invoices to the IRS. The issuers need to submit the copies of Form 1099-H by January 31 to the taxpayers.
8. 1099- INT (Interest Income)
Form 1099-INT is used to consider the income on investment and the taxable amount on it like ordinary income. It doesn’t include the accounts of bonds or mutual fund investments annually. The entity such as bank or any other financial institute that has paid you $10 or more of interest during the year needs to prepare this form and will send the copy to the ones earned the interest by January 31. It needs to file the copy with the IRS as well.
9. 1099- K (Merchant Card and Third-Party Network Payments)
This form can be used for credit/debit/stored-value cards or third-party payments like PayPal, Venom, and so on if they exceed the minimum reporting threshold level recorded all in the same page. The digital payment vendors issue this Form and send it by January 31.
10. 1099-PATR (Taxable Distributions Received from Cooperatives)
Form 1099-PATR is sent to taxpayers who received at least $10 in patronage dividends and other distributions from a cooperative in the past year. It must be furnished to recipients by January 31 by the issuers and e-filed by March 31 with the IRS.
11. 1099-Q (Payment from Qualified Education Programs)
Form 1099-Q is used for payment by the IRS of distributions from a Coverdell Education Savings Account (ESA) or a 529 Plan receives taxes included. It will be received by the early February after the close of last tax year and the administrator needs to send it by January 31. The issuing administrator should also send the copy to IRS by March 31 (if issued electronically) or by February 28 (if issued through a paper copy).
12. 1099- NEC (Payments made to Non-Employee Compensations)
Form 1099-NEC is the report that records the non-employee compensation. Prior to 2020, it was also recorded in 1099-MISC; whereas, now it must be recorded in Form 1099-NEC because of the new way of reporting self-employment income. This needs to be filed by January 31 as well like many other 1099 forms in the following year of the applicable tax year.
13. 1099- MISC (All the Remaining Miscellaneous Payments)
For reporting various miscellaneous incomes for which other Form 1099s are not appropriate, one used the Form 1099-MISC. These miscellaneous incomes include Royalties, Medical Studies, and Market Research. Remember that in case of filing this form by paper, the last date is March 1, and for the electronical filing it is March 31. If the dates do not fall on business days, then the next business days become the deadlines.
How to file FORM 1099?
Filling out the 1099 paperwork is not complicated in case you have already got all the records you want in advance. By the time you begin with the 1099s, the contractor must have already furnished you with a finished W-9 and you’re legally allowed to withhold 28% of the pay, if the shape wasn’t submitted or includes faulty data.
A vendor’s W-9 is extraordinarily beneficial as it includes their tax submitting status. It informs you in case you want to create a form for that specific contractor. It also consists of a vendor’s name, address, and Employer Identification Number (EIN) or Social Security number (SSN).
A wise person says, “Deadlines are negative inspiration and one must not take them…”
In order to make sure that you are not falling behind, visit the official IRS site. One can download the form from there if they have to issue it. In case you are the one who will receive it, you should start with sorting your records.
NOTE: There are many sites other than IRS from where you can get the Form 1099. To know more about these forms, reach out to us.
Written by – Tushar Khurana and Priyanka Rampal
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