What Is a 1099 Form?
A 1099 form is a U.S. tax document used to report income that isn’t earned as a traditional employee. Instead of wages from an employer, the 1099 form covers money you receive from freelance work, contract jobs, investment earnings, rental income, or other non-employee sources. The IRS uses this form to track taxable income that must be reported even if no taxes were withheld.
How a 1099 Form Works
When a business or individual pays you above a certain amount—usually $600 or more—they must issue a 1099 form. You also receive a copy, which you include in your tax return. Unlike a W-2 job, taxes are not taken out automatically. This means freelancers, contractors, and investors are responsible for paying income and self-employment taxes directly to the IRS.
Common Types of 1099 Forms
- 1099-NEC: For independent contractors and freelance income.
- 1099-MISC: For miscellaneous income such as rent or royalties.
- 1099-INT: For interest earned from bank accounts.
- 1099-DIV: For dividends and investment distributions.
- 1099-K: For income from payment platforms like PayPal or Stripe above IRS thresholds.
Why the 1099 Form Matters
The 1099 form helps the IRS ensure all sources of income are reported. For individuals, understanding this form is essential to avoid tax penalties and to correctly calculate how much tax is owed. For businesses, issuing proper 1099 forms keeps accounting transparent and compliant with federal regulations.
The Simple Takeaway
A 1099 form reports income earned outside regular employment—like freelance work or investments—and is essential for accurate tax filing in the U.S.