If you receive $600 from a bank, brokerage or business client over the course of a year, the company in question probably has to send you a 1099, as well as mailing a copy to the IRS. The 1099 family of forms helps the government keep track of your non-wage income. Freelance income, returns on investment, canceled debt and withdrawals from an IRA can all trigger a 1099.
TL;DR (Too Long; Didn't Read)
How much you need to earn to receive a 1099 depends on the specific type of 1099.
If you work for a company but you're not an employee, you may get a 1099-MISC in the mail. A business usually sends out a 1099-MISC if it pays you $600. If you earn royalties, $10 in payments is all that's required. Private individuals don't have to send out forms at all. Fixing the roof for a local business may get you a 1099, but fixing the roof at the business owner's house will not, no matter how much he pays you.
Banks send out a 1099-INT any time you earn more than $600 in interest. You sometimes receive the form if you earn less. For example, if cashing in a CD early loses you $10 or more of interest, a 1099 goes out. The 1099-DIV for dividend income has a low threshold: All it takes is $10 in dividends and the bank or brokerage has to send you a form. If you get more than $10 from an IRA, pension or annuity, you get a 1099-R.
Debts and Debt Forgiveness
The federal government considers most canceled debts a form of taxable income. If your credit-card company or other creditor forgives $600 or more in debt, the IRS wants to know. As with other 1099s, the 1099-C only applies to business: If your best friend forgives a personal loan to you, no 1099s go out. If one of your creditors gets property in payment of the debt -- repossessing your car, for instance -- you get a 1099-A stating the property's fair market value.
When you have multiple freelance clients or investment accounts, each company only tracks its own payments to you. Six businesses paying you $500, for instance, generates $3,000 in taxable income but no 1099 forms. That's why you need to keep your own records of different 1099 income and not just rely on the forms. A freelancer who only reports the income on her 1099-MISCs will end up in trouble if she has clients who paid her smaller amounts.
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.