10,000 1099s
This time of year brings forth to our inboxes a multitude of documents we’ll need to prepare and file our tax returns. There are so many! And a lot of them are 1099 forms, but they all do different things.
Broadly, a 1099 form is how the IRS gets notified of any non-salary income you earn - your salary, if you have one, is reported on the W2 you probably also received by now. There are 20 (!) different flavors of 1099, to cover different types of income. They are identified by a letter suffix, and these are among the common ones most of us will see:
1099-B: Proceeds from Broker and Barter Exchange Transactions
If you sold stocks, mutual funds, ETFs, bonds, real estate, or crypto in your taxable brokerage account (meaning not an IRA or Roth IRA), you’ll get one of these from your broker detailing what was sold and what your gain or loss was.
1099-DIV: Dividends and Distributions
If you earned dividends on any of your investments, it will be reported here - you’ll get it from your broker
1099-INT: Interest Income
Any interest you earned (over $10) on bank balances or similar will be reported on this form
1099-MISC: Miscellaneous Income AND 1099-NEC: Nonemployee Compensation
I am lumping these together because the NEC form is the relatively new way that self-employment income gets reported - prior to 2021, everything was on the MISC. The 1099-MISC is still used for certain circumstances (royalties, prizes, reselling items online), but the NEC will be much more common now.
If you are a freelancer, independent contractor, or earn any self-employment income, the 1099-NEC is how your earnings are reported to the IRS. The client/customer/entity that pays you must issue one if you made more than $600 last year, but crucially, you (the freelancer) are responsible for reporting all your income to the IRS, regardless of you receive a 1099-NEC or how much you earned from each client.
Conversely, if you employed independent contractors in the course of your business, and paid more than $600 to anyone over the course of the year, you must issue a 1099-NEC. Bookkeeping services like Quickbooks or Wave will help with this.
1099-Q: Payments From Qualified Education Programs
If you took money out of a 529 or ESA plan, you will receive one of these. You will report these along with your qualified education expenses to substantiate that the distribution should be tax-free.
1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, or IRAs
If you took a distribution from a tax-advantaged account, whether qualified or unqualified, expect to receive one of these with the details. It will also show any penalty you paid, for example if you took an early distribution (prior to age 59 1/2) from an IRA. Income reported on this form is not necessarily taxable - Roth distributions get reported here but aren’t subject to tax.
You’ll also receive one of these if you receive “income in respect of a decedent”, meaning someone died and you received the income they were owed before they passed away. If the decedent died before taking last year’s RMD, for instance, and the beneficiary satisfied the requirement, the beneficiary would receive a 1099-R with that distribution information.
1099-S: Proceeds from Real Estate Transactions
Did you sell real estate? You will receive one of these, probably either from the broker or the attorney who handled the closing.
SSA-1099: Social Security Benefit Statement
Any recipient of Social Security benefits (not SSI) will receive one
These are less than half of the 1099 forms out in the wild, but the others are for quite specific, narrow circumstances. The above are the ones most of us are likely to see, and even still, we won’t see them all every year.
Remember that the more institutions where you have accounts, the more 1099s you should expect.
Often, brokers will also issue consolidated 1099s for everything that happened in the accounts you have with them, combining the INT, DIV, B, R, and possibly others into one document, comprising the individual forms. It makes it easy to be sure you have it all when you prepare to file.