The 1099 Family

The 1099 tax form is used to report income other than wages, salaries and tips. They are being seen more and more frequently as many employers are opting to use contract labor as opposed to hired employees. If an independent contractor receives a minimum of $600 in compensation during the year from a domestic business, that business must furnish the contractor with a Form 1099. There are many different types of 1099, each having a specific designation and use.

The 1099-MISC is used for independent contractors (i.e. attorneys, home workers, performers, etc.) or for income which is classified as non-employee or miscellaneous revenue. They are most often received for contract-for-hire work, leased workers, or general contractor payments for which there is not a direct sale of merchandise.

The 1099-INT is used for interest income purposes. The recipient of the interest income will receive a 1099-Int which shows the total amount of interest received for the year. This form is also used to report other tax items related to interest income such as early withdrawal penalties, federal tax withheld and foreign tax paid.

The 1099-OID is issued when an original issue discount is received, usually from transactions related to mortgages served by the Federal Housing Authority.

The 1099-DIV is often sent to investors by brokers, mutual funds or investment companies. The form is a record of all taxable gains and dividends paid to an investor during the year. The amount shown on the 1099-DIV could contain ordinary dividends, total capital gains, qualified dividends, foreign tax paid, federal income tax withheld and foreign source income.

The 1099-B is used for barter exchange transactions. Instead of a monetary payment, an exchange of something other than money took place, the value of which was accepted as payment for the goods or services given.

The 1099-A is used if there has been an acquisition or an abandonment of secured property.

Form 1099-C is received if there has been a cancellation of debt, as from a bankruptcy proceeding, credit card default, or other failure of a borrower to pay a debt that the lender can use as a tax deduction.

The 1099-SA is used for distributions from HSAs and MSAs.

The 1099-Q is used to report distributions from a Coverdell ESA.

Form 1099-R reports distributions from an IRA.

The 1099-CAP is used to report significant changes in corporate control and capital structure of a business organization.

The 1099-LTC reports long-term care and accelerated death benefits. As a larger segment of our population grows into old age, they will make more use of long-term care insurance and receive these forms as of record of their benefits.

Although these forms most often denote taxable income to the recipient, this is not always the case. For many older citizens and individuals receiving the tax forms as part of a discounted program through the government, they are only informational forms that do not result in added income tax liability. For the rest of us, however, a 1099 tax form usually means that our income has gone up.