What Is the Purpose of a 1099 Tax Form?

There are lots of ways to make money that don't show up on a W-2 form. If you work for yourself, rent out office space or earn investment income, your clients or investment brokers use the various 1099 forms to report your income. Any time a company sends you a 1099, it also sends one to the IRS.


If you're self-employed, clients report how much they paid you over the course of a year by using a 1099-MISC. A client only makes out a 1099 if he paid you at least $600 and if it was a business-to-business transaction. Painting the office of a local law firm might generate a 1099, but not painting a lawyer's private home. If your business is incorporated, your clients don't usually have to submit a 1099.

Other Miscellaneous Income

Some 1099 forms are specialized, but the 1099-MISC covers a lot of ground. If you rent out office space or other property to a business that pays you $600 or more, you get a 1099. A company that pays you more than $10 in royalties -- whether for oil or gas leases or for a book -- has to send you the form. If a business gives out an award or prize and you're not an employee -- you win $10,000 on "Jeopardy," for example -- that will earn you a 1099 as well.

Other 1099s

The 1099-INT and 1099-DIV form report, respectively, interest and dividend payments of $10 or more. If you receive more than $10 in income for the year from your IRA or 401(k), expect a 1099-R in the mail. When a lender forecloses on your house, you get a 1099-A to report how much debt was wiped out. You may receive 1099s even if you don't owe tax -- for example, if you make tax-free withdrawals from a Roth IRA.


Unlike the case with a W-2, you don't send in 1099s with your tax return. Instead, file them with your tax records for the year: You can use them to double-check your own financial records, though they may not be a complete guide. If you did $300 consulting work for a business client, for instance, that's taxable self-employment income, but it's not enough to require a 1099.


About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.