Form 1099
Also called information return
A family of IRS information returns reporting income other than wages, such as freelance pay, interest, dividends and retirement withdrawals.
What it means
Form 1099 comes in many versions, each covering a type of payment. Common ones include 1099-NEC for nonemployee compensation to independent contractors, 1099-INT for interest, 1099-DIV for dividends, 1099-B for sales of investments, 1099-R for retirement and pension distributions, and 1099-K for certain payment card and online payment transactions.
The payer sends a copy to the recipient and the IRS, which matches them against tax returns. Income is taxable whether or not a 1099 is received, and reporting thresholds vary by form. Unlike W-2 wages, most 1099 income has no tax withheld, so recipients may need to make estimated tax payments.
Example
For example, a freelancer who earns $30,000 from several clients might receive a 1099-NEC from each, and also a 1099-INT showing $300 of interest from a savings account. All of it is reported on the return.
How it’s used
- Freelance and gig work
- Reporting investment and bank income
- Reporting retirement account withdrawals
Good to know
- Self-employed people often set aside part of each payment for income and self-employment tax, since nothing is withheld.
Related terms
Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.