Small Business Tax Tips: Understanding the Different Types of IRS Form 1099

By QuickBooks

4 min read

Companies that hire independent contractors may be familiar with IRS Form 1099-MISC, which is sent out to contractors to use for tax-filing purposes. But many businesses may need to file different types of 1099s depending on the type of work they perform and the ways they used their finances.

IRS Forms 1099 are only sent to sole proprietorships and partnerships. You are not required to send 1099s to corporations, except to medical corporations and law firms.

The most important thing you should know about 1099s is that you should not wait for them to arrive. The fact is 1099s are not really relevant to your business’ income. When you are in business, it is your responsibility to do your own bookkeeping; you shouldn’t wait for the 1099s to come before you start getting your books in order. You need to track all the money you receive throughout the year, whether it comes via checks, wire transfers, electronic payments, cash or even barter.

So what’s so important about 1099s? They are tattletales. Their sole reason for existence is to let the IRS know how much you paid someone, and vice versa. So the main reason to gather and review the 1099s is to make sure the amounts are not higher than you actually paid. If the 1099s are too high, what do you do? We will cover that another time.

For now, here are the principal Forms 1099 you may receive, in order of frequency.

1099-MISC

IRS From 1099-MISC summarizes all non-employee compensation. It’s what independent contractors use to calculate and file taxes.

If your company employs independent contractors, you’ll need to send 1099-MISCs to all contractors you’ve employed throughout the year. For guidance with sending out and filing 1099s as an employer, check out our guide to filing 1099s.

You may also receive a 1099-MISC when your company provides services to another company or person, or rents them space or materials. This is not intended to include payments to you for products you sold. But if your invoice included both products and services (think of a plumber), the 1099 will include the full amount. Amounts in boxes 5, 6, 7, 10 and 14 will generally be self-employment income. Amounts in boxes 1-3 might not always be self-employment income. It will depend on the source of the income and the circumstances. You’ll report this self-employment income when you file your taxes in April.

Note: The 1099-MISC is also used for prizes, royalties and information about your sales in “direct marketing” (or multi-level marketing).

1099-INT

Form 1099-INT summarizes your interest income for the tax year. For example, if your company lent money to another company or person, you will most likely receive income in the form of interest on the loan.

This will be reported on Schedule B of your personal return. Even if the 1099-INT is issued to a partnership or S corporation, it will be listed separately on the Schedule K-1 and end up on your personal Schedule B.

1099-DIV

This form summarizes dividends, distributions and capital gains for the tax year. This income may be the result of your company using excess cash to invest in stocks, or it may be from another corporation your company owns.

This will be reported on Schedule B of your personal return. Even if the 1099-DIV is issued to a partnership or S corporation, it will be listed separately on the Schedule K-1 and end up on your personal Schedule B.

1099-B

Form 1099-B summarizes income from all stock transactions; it also summarizes barter transactions. Whereas 1099-DIV covers distributions and gains, 1099-B summarizes income from the sales of stock. When you sell stock, the IRS is told the amount of the gross sale. They don’t always get a report about how much the stock cost you, so be sure to report these sales on your tax returns (usually on Form 8949) along with the cost, even if you have a loss. The IRS doesn’t know you have a loss until you tell them.

1099-K

You or your business will get this form from banks, PayPal, Airbnb and other money collections sources if you had 200 transactions and had sales of $20,000 or more. The main purpose of this form is to report all the credit card sales, usually for retail and online products or software. You will get this if you have been selling on eBay, Etsy, Amazon or other online marketplaces, not just when you have a full-blown business. You might also receive a 1099-K if you were a driver for Uber, Lyft or similar service.

Note: If you were paid for all your services by credit card or PayPal (and such), you won’t get a 1099-MISC. You will get this form instead.

The IRS offers a whole array of other 1099 forms. Don’t worry, most of the rest won’t apply to you. But just in case, take and look and see if one of them strikes a chord.

If you’re an independent contractor and need more help with filing your 1099s and other tax forms, see our complete guide to taxes for the self-employed. If you’re a small business owner who employs independent contractors and need help managing your 1099s, see our guide to filing 1099s.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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