What is a 1099?

Filed under: Finance | No Comments »

A 1099 can be any one of a series of information returns issued by payers that report payments made to individuals other than wages, salaries, and tips (which are reported on the W-2). Most other forms of income are reported various 1099 forms which are issued by the entity that paid the money. One copy is saved by the payer, one copy is sent to the payee (who then uses it to fill out his or her individual tax return), and one copy is sent directly to the Internal Revenue Service (IRS), who saves it in the payee’s tax record. Almost every conceivable way of earning income in the United States is covered by a 1099 form.

There are sixteen basic types of 1099 forms, covering all kinds of income that is not reported on the employer issued W-2. Some types of 1099 forms are fairly common, such as the 1099R, which documents distributions from most retirement plans (IRAs, 401(k)s and others) or the 1099DIV, which documents dividends and distributions from various investment accounts. On the other hand, other 1099 forms are uncommon and only really apply under unique circumstances, such as the 1099OID, which documents discounts connected to holding various government bonds. When filling out an individual tax return, the taxpayer generally needs to have 1099s reflecting all of his or her alternative income.

1009s are issues by the payer, or the organization that paid the money to the individual taxpayer. Commonly this is the trustee who administrates the taxpayer’s retirement plan or the investment firm that holds the taxpayer’s investments. While the payer is obligated to mail out 1099s to the taxpayers by the end of the calendar year, the payer is not obligated to track down the taxpayer. This means if the address is bad or for some other reason the 1099 does not reach the taxpayer, it is the taxpayer’s responsibility – not the issuer’s – to obtain the relevant 1099s before filing their annual tax return.