1099 form

Definition

A 1099 form is a tax document used to report various types of income other than wages, salaries, and tips. It is commonly used for freelance earnings, interest, dividends, and other miscellaneous income sources.

5 Must Know Facts For Your Next Test

1. The 1099 form must be sent to the recipient by January 31st of the following year.
2. There are several types of 1099 forms, such as 1099-MISC for miscellaneous income and 1099-INT for interest income.
3. Failure to report income from a 1099 can result in penalties and fines from the IRS.
4. Recipients of a 1099 form are responsible for paying taxes on the reported income since it typically does not have tax withheld.
5. Saving a portion of your freelance or miscellaneous income can help cover any tax liabilities that arise from the reported amount.

Review Questions

• What is the purpose of a 1099 form?
• By what date must a 1099 form be sent to its recipient?
• Why is it important to save some of your freelance earnings if you receive a 1099 form?

Related terms

W-2 Form: A tax document used by employers to report an employee's annual wages and the amount of taxes withheld from their paycheck.

Freelance Income: Earnings received by individuals who work independently rather than being employed by someone else.

Tax Liability: The total amount of tax that an individual or business owes to the government.