Form 1099

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Form 1099 is a form promulgated by the Internal Revenue Service (IRS) and is used in the United States income tax system to prepare and file an information return to report various types of income other than wages, salaries, and tips (for which Social Security Administration Form W-2 is used instead). The term information return is used in contrast to the term tax return although the latter term is sometimes used colloquially to describe both kinds of returns.

Each payer must complete a 1099 for each covered transaction. Three copies are made: one for the payer, one for the payee, and one for the IRS.

Contents

[edit] Examples of uses of Form 1099

A notable use of Form 1099 is to report amounts paid to independent contractors (in IRS terminology, such payments are nonemployee compensation). The ubiquity of the form has also led to use of the phrase "1099" to refer to contractors themselves. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid more than $600 for services during a year. This requirement usually does not apply to corporations receiving payments.

Many businesses and organizations must file thousands of 1099s per year. Thus, payers who file 250 or more Form 1099 reports are required to file all of them on either magnetic tape or floppy disk.

Form 1099 is also used to report interest (1099-INT), dividends (1099-DIV), sales proceeds (1099-B) and some kinds of miscellaneous income (1099-MISC). Blank Form 1099s and the related instructions to the forms can be downloaded from the IRS website (http://www.irs.ustreas.gov/formspubs/lists/0,,id=97817,00.html).

Payees use the information provided on the 1099 forms to help them complete their own tax returns. In order to save paper, payers can give payees one single Combined Form 1099 that lists all of their 1099 transactions for the entire year. Taxpayers are usually not required to attach Form 1099s to their own Federal income tax returns unless the Form 1099 includes a report for Federal income tax withheld by the payer from the related payments.

[edit] Variants for Form 1099

Several versions of Form 1099 are used, depending on the nature of the income transaction:

as of 2004 tax year
  • 1099-A: acquisition or Abandonment of Secured Property
  • 1099-B: Proceeds from Broker and Barter Exchange Transactions
  • 1099-C: Cancellation of Debt
  • 1099-CAP: Changes in Corporate Control and Capital Structure
  • 1099-DIV: Dividends and Distributions
  • 1099-G: Government Payments
  • 1099-H: Health Insurance Advance Payments
  • 1099-INT: Interest Income
  • 1099-LTC: Long Term Care Benefits
  • 1099-MISC: Miscellaneous Income
  • 1099-OID: Original Income Discount
  • 1099-PATR: Taxable Distributions Received From Cooperatives
  • 1099-Q: Payment from Qualified Education Programs
  • 1099-R: Distributions from Pensions, Annuities, Retirement Plans, IRAs, or Insurance Contracts
  • 1099-S: Proceeds from Real Estate Transactions

[edit] Filing requirements

The form is used to report income, proceeds, etc., only on a calendar year (January 1 through December 31) basis, regardless of the fiscal year used by the payer or payee for other Federal tax purposes. The returns must be filed with the IRS by the end of February immediately following the year for which the income items or other proceeds are paid. Copies of the returns must be sent to payees, however, by the end of January.

The law provides various dollar amounts under which no Form 1099 reporting requirement is imposed. For some Form 1099s, for example, no filing is required for payees who receive less than $600 from the payer during the applicable year.

The issuance or non-issuance of a Form 1099 in a particular case is not determinative of the tax treatment required of the payee. Each payee-taxpayer is legally responsible for reporting the correct amount of total income on his or her own Federal income tax return regardless of whether a Form 1099 was filed.

For a variety of reasons some Form 1099 reports may include amounts that are not actually taxable to the payee. A typical example is Form 1099-S for reporting proceeds (not gain) from real estate transactions. The Form 1099-S preparer will report the sales proceeds without regard to the amount of the taxpayer's "basis" in the real estate sold. (Basis is usually the amount of cost incurred by the taxpayer when he or she acquired the property, perhaps years before the sale). The taxpayer's basis amount is deducted by the taxpayer (on his or her own tax return) from the proceeds amount to determine the gain (if any) on the sale.

In any case, the payee-taxpayer remains responsible for filing an accurate Federal income tax return.

[edit] See also

[edit] External links

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