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Sometime in February, you might receive a 1099-MISC tax form (or more than one) in the mail. You need to hang on to it because it can have a big impact on your tax life. Here's how the 1099-MISC, titled "Miscellaneous Income," works.
What is Form 1099-MISC used for?
A 1099-MISC tax form is a type of IRS Form 1099 that reports certain types of miscellaneous income.
At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
At least $5,000 for consumer products you sold anywhere other than a permanent retail establishment.
At least $600 for:
Prizes and awards, including what you win on game shows.
Other income payments.
Medical and health care payments.
Crop insurance proceeds.
Fish (or other aquatic life) you sold for resale.
Cash from a notional principal contract to an individual, partnership or estate.
Payments from clients if you are an attorney.
Proceeds from a fishing boat.
Who should get a 1099-MISC?
The 1099-MISC is a common type of IRS Form 1099, which is a record that an entity or person — not your employer — gave or paid you money.
You might have received a 1099-MISC tax form from a client in the past if you're a freelancer, independent contractor or self-employed. However, starting in 2020, those payments are now reported on the 1099-NEC instead (see more below).
A Form 1099-MISC will have your Social Security number or taxpayer identification number on it, which means the IRS will know you’ve received interest — and it will know if you don’t report that income on your tax return.
Do you pay taxes on a 1099-MISC?
Simply receiving a 1099-MISC tax form doesn’t necessarily mean you owe taxes on that money. You might have deductions that offset the income, for example, or some or all of it might be sheltered based on characteristics of the asset that generated it. In any case, remember: The IRS knows about it.
What do I do with my 1099-MISC?
You use your IRS Form 1099-MISC to help figure out how much income you received during the year and what kind of income it was. You’ll report that income in different places on your tax return, depending on the type of income.
If you need help estimating how interest income on a Form 1099-MISC could affect your tax bill, check out our free tax calculator.
1099-MISC vs. 1099-NEC
In 2020, the IRS revived the 1099-NEC form for reporting nonemployee compensation. In other words, if you freelanced, were self-employed or had a side gig, your clients should send you a Form 1099-NEC instead of a Form 1099-MISC. As always, you'll use the information on that form to prepare your tax return.
What is the difference between a 1099 and 1099-MISC?
A 1099-MISC is a type of 1099. Form 1099-MISC reports a relatively unusual form of income. It's different than other kinds of 1099s you might get in the mail.
Form 1099-B covers income from the sale of several types of securities, as well as some types of bartering that take place via bartering exchanges, typically websites. In that case, the exchange might “1099 you” for the income you received. A 1099 isn’t usually required if you barter with someone directly, though you may have to report the income.
If you received money from a state, local or federal government — including a tax refund, credit or offset — you might get one of these. If you were on unemployment during the year, you might also have a 1099-G headed your way.
If your long-term care insurance paid out benefits during the year, the insurer will likely file a Form 1099-LTC. If you received payments from the accelerated death benefits of a life insurance policy, those are reported on this form, too.
If you got distributions from a pension, retirement plan, profit-sharing program, IRA or annuity, you might receive a 1099-R. (Remember, many retirement plans are tax-advantaged, so this form might be simple record-keeping on behalf of the IRS.) If you took a loan from your retirement plan, you might have to treat it as a distribution, which means it might be on this form, too, as well as permanent and total disability payments under life insurance contracts.
Anybody responsible for closing a sale or exchange of real estate furnishes this statement to you, reporting the proceeds. The proceeds from the sale of your house or other real estate aren’t necessarily taxable (here's more about how that works).
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