A 1099 Form is the official IRS form used to report income that is not considered wages or salary paid by an employer, TurboTax explains. Companies that employ freelancers or independent contractors report pay for those individuals via a 1900-MISC form. When a business has to report income derived from bank interest and investment dividends, it also uses a 1099 form.Continue Reading
A 1099 form is a way that organizations, government entities and businesses report income that is considered taxable but achieved in ways other than regular employment, TurboTax explains. Those who are self-employed receive a 1099 to use for income tax preparation, while banks send out form 1099-DIV to report income earned from stock investments. Income earned from a retirement account is reported on Form 1099-R.
Government agencies use Form 1099-G to report money paid to individuals, such as income tax refunds or unemployment compensation, while Form 1099-C is used by creditors to report debt cancellations. Debt cancellations are not direct payments, but the IRS considers the savings as taxable income. When taxpayers are preparing their tax returns, they should report every 1099 they receive, because the IRS gets a copy as well, Forbes reports. A taxpayer who disagrees with the information on a 1099 should try to work the disagreement out with the payee. If that's not possible, the taxpayer should explain on her tax return why she believes there is an error.Learn more about Taxes