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.
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.
- Instructions for Reporting 1099-MISC Income
- What Do I Enclose With a Form 1040X?
- How to File an Amended Tax Return from Head of Household to Married Filling Separately
- How to Deduct Expenses Related to Farmland Held for Cash Rental
- Can We File Jointly If I Have a W-2 & He Has a 1099?
- IRS 1099 Guidelines