Q:

What is an IRS tax form 1099?

A:

Quick Answer

An IRS Form 1099 is used for reporting income that is not a salary or wage paid by an employer. Companies employing independent contractors report each contractor's income on a 1099-MISC. A Form 1099 is also used to report income derived from investment dividends and bank interest.

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Full Answer

A Form 1099 provides a means for companies, organizations, government agencies and financial institutions to report taxable income earned in alternative ways other than standard employment. Self-employed individuals working for companies often receive a Form 1099 to use for tax preparation. Financial institutions send out the 1099-DIV, which reports income earned from mutual fund and stock investments. Taxable interest income is reported by banks on a 1099-INT form. Likewise, funds withdrawn from a retirement account during the year is commonly reported on Form 1099-R.

Federal and state government agencies use Form 1099-G to report monies paid to taxpayers. For instance, this form covers money paid out for unemployment compensation and state income tax refunds. Alternatively, Form 1099-C is used by creditors to report debt cancellations. While a debt cancellation is not a direct payment, the Internal Revenue Service may consider any savings derived from the cancellation as taxable income. Income reported on a Form 1099 is sent to the Internal Revenue Service.

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