When you start a small business, you take on a world full of new (and often complex) taxes, forms, and other responsibilities. With all of the new minutiae you have to learn, it’s easy to get confused and frustrated.
Not to mention, resources like the Internal Revenue Service (IRS) website don’t do a whole lot to clarify or explain things in a digestible way. And the IRS is far from the only website that struggles to make tax forms make sense to most small business owners.
That’s why we created this guide, among others—to help simplify all that comes with launching and running a small business that earns money, pays supplies, and hires employees and contractors.
In this guide, we’re talking about 1099 forms. Specifically, we cover:
- What 1099 forms are (plus the many variations)
- Why small businesses need to know about 1099 forms
- How to figure out if you need to file a 1099 form (and which one)
- When and how to fill out and file 1099 forms
What are 1099 forms?
If you’re in a rush, here’s the gist:
- What’s reported on 1099 forms: Income, both earned and paid
- When they’re filed: Annually
- Who needs to file: Anyone who pays another individual or business more than $600 (aside from salary) throughout the year
Put simply, 1099 forms are a series of documents known as “information returns.” The IRS uses these forms to keep track of the income individuals earn outside of their regular salary. As Nerdwallet puts it, “A 1099 tax form is a record that an entity or person—not your employer—gave or paid you money.”
In total, the current 1099 series includes quite a few forms:
- 1099-A, Acquisition or Abandonment of Secured Property
- 1099-B, Proceeds from Broker and Barter Exchange Transactions
- 1099-C, Cancellation of Debt
- 1099-CAP, Changes in Corporate Control and Capital Structure
- 1099-DIV, Dividends and Distributions
- 1099-G, Certain Government Payments
- 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments
- 1099-INT, Interest Income
- 1099-K, Payment Card and Third Party Network Transactions
- 1099-LS, Reportable Life Insurance Sale
- 1099-LTC, Long Term Care and Accelerated Death Benefits
- 1099-MISC, Miscellaneous Income
- 1099-OID, Original Issue Discount
- 1099-PATR, Taxable Distributions Received from Cooperatives
- 1099-Q, Payments from Qualified Education Programs
- 1099-QA, Distributions from ABLE Accounts
- 1099-R, Distributions from Pensions, Annuities, Retirement Plans, IRAs, etc.
- 1099-S, Proceeds from Real Estate Transactions
- 1099-SA, Distributions from an HSA
- 1099-SB, Seller’s Investment in Life Insurance Contract
- SSA-1099, Social Security Benefit Statement
- RRB-1099, Payments by the Railroad Retirement Board
- RRB-1099-R, Pension and Annuity Income by the Railroad Retirement Board
The IRS uses so many types of 1099 forms because there are a lot of ways to earn income outside of your regular salary—and each form reports a different type of income.
As a small business owner, you’re likely to both receive and have to file different variations of the 1099 form, but we won’t talk about every 1099 form here. For our purposes, we’ll stick to those versions that small business owners and self-employed people are most likely to come across regularly:
What is Form 1099-DIV?
As the name implies, Form 1099-DIV is how corporations, shareholders, and the IRS keep track of dividends and other distributions paid from a company to its shareholders. If you own shares in a company the distributes dividends, you should receive Form 1099-DIV from them.
Similarly, if your business sells shares and pays dividends to shareholders, you’re responsible for filing Form 1099-DIV and sending a copy to each shareholder.
What is Form 1099-INT?
Form 1099-INT is designed to report on interest income (above $10) earned and paid over the course of the year. Banks, for example, often furnish 1099-INT forms to customers who earned interest on the money they keep in accounts there.
As a small business and employer, you’re more likely to deal with 1099-INT forms as a recipient—for the interest earned on any business or personal bank accounts.
What is Form 1099-K?
Form 1099-K is one form that the majority of small business owners need to be aware of. If you accept payments from clients and customers via credit card and/or through a third-party payment processor, you may receive a 1099-K form. The purpose of Form 1099-K revolves around ensuring that online retailers pay the appropriate tax on their sales—but it also applies to other types of business.
For example, if you invoice clients and accept credit card payments through Wave, you could receive a 1099-K from us. It’s important to note, however, that payment processors and credit card companies are only required to send 1099-K forms to those who processed more than $20,000 and 200 individual transactions over the course of the prior year.
What is Form 1099-MISC?
In the world of self-employment, Form 1099-MISC is often one of the most common. Freelancers, for example, receive 1099-MISC forms from any clients who paid them more than $600 during the prior year. The 1099-MISC is essentially the freelancer’s version of a W-2 form.
As a small business owner, if you work with independent contractors or freelancers, you may both receive and submit 1099-MISC forms.
Why small businesses need to know about 1099 forms
The 1099 form series deals with paying and earning money, and that’s pretty much what operating a business is all about.
As we mentioned, there are a lot of ways to earn income outside of your regular salary, commissions, and bonuses. The IRS is keen to keep track of all that other income so they can ensure you pay the appropriate income tax on it. In a nutshell, that’s what all 1099 forms are designed to do—help the IRS keep track of outside income earned.
As a small business owner, and someone who’s self-employed, you’re very likely to end up both receiving and sending some variation of a 1099 form. We won’t tell you that you need to memorize all 22 forms and what they’re used for, but it is important to develop an understanding of the more common 1099 variations.
Do I need to submit a 1099 form?
With all the different types of 1099 forms, it can be hard to make blanket statements about who does or doesn’t need to submit one. But in short, if you paid someone more than $600 for anything other than sales or employment, you may have to file a 1099 form.
In addition, you’re responsible for including and filing any 1099 forms you receive as part of your own annual tax return.
Which 1099 forms do I need to submit?
Here are the most likely scenarios small business owners may encounter and the 1099 form variation they require:
- If you worked with an independent contractor or freelancer (and paid them more than $600), then you’re responsible for submitting Form 1099-MISC and sending a copy to the contractor. Note: You’ll fill out and file a separate 1099-MISC for each freelancer to whom you paid $600 or more.
- If you are an independent contractor, you’ll file all 1099-MISC forms you receive from clients along with your annual tax return.
- If your company sells shares and you paid dividends or other distributions to shareholders, you’re responsible for submitting Form 1099-DIV and sending a copy to each shareholder.
- For real estate businesses, you’re responsible for submitting Form 1099-S for each sale of real estate property made throughout the year. However, if you use a title company or attorney to close the sale, they’ll usually handle this part for you.
How to fill out 1099 forms
Thankfully, the majority of 1099 forms are fairly straightforward to fill out. You can find specific instructions on filling out common 1099 variations below:
When to submit 1099 forms
Generally speaking, most 1099 form variations are due to the IRS by March 31st of each year (when filed electronically). However, if you’re reporting payments to independent contractors (Box 7 on Form 1099-MISC), you’ll need to submit Form 1099-MISC to the IRS by January 31st and furnish a statement to the person paid by February 18th.
In addition, if you choose to fill out and file your 1099 forms on paper, and submit by mail, then the deadline is February 28th instead.
How to submit 1099 forms
When the time comes to submit the applicable variation of Form 1099, you have a few options to choose from:
- E-file online
- Mail in your form
- Work with an account to file for you
- Any combination of the above
Note: Whichever you choose, it’s important to remember that you are also required to send a copy of the appropriate 1099 form to anyone you paid.
This is the method of filing that the IRS prefers. According to them, it’s
- More accurate
- More secure
In order to file Form 1099 (or another IRS form) online, you’ll need to use the IRS Filing Information Return Electronically (FIRE) system. The IRS also offers lists of approved software and authorized e-file providers to help you file.
Mail in your form
Small businesses and employers also have the option to mail in Form 1099. (Note: If filing on paper, you’ll need to meet the earlier deadline of February 28th.)
To do so, you’ll need to print the applicable Form 1099, plus Form 1096, which acts as a cover page for each group of 1099 forms. You’ll mail this to the corresponding address for your state. You can find the correct mailing address on page 7 of the General Instructions for Certain Information Returns.
Work with an accountant to file for you
Your last, and often best, option for filing 1099 forms is to work with a tax professional or CPA. Tax professionals can both fill out and file any necessary variation of Form 1099 and will also fill out and file the applicable 1096 form, if needed.
When it comes to 1099 forms, there are a lot of variations to keep track of. To sum up, here are the main points small business owners and employers need to remember:
- 1099 forms report any income paid or received outside of traditional employment
- If you pay independent contractors or freelancers, you must file Form 1099-MISC for annual payments over $600.
- If your business has shareholders who receive dividends or other distributions throughout the year, you must file Form 1099-DIV for each shareholder.