Podcast: What is a 1099 and how does it work?
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Transcript below
This is taxes made simple by Yahoo finance and turbo tax. I'm Jana Heron.
So let's talk 1099’s. These are another tax form that you're going to get in the mail and there are many different kinds too, so you need to know which one is for which and why you need them. Broadly speaking, 1099 are known as information returns and they usually report non-employee income. But here's the thing, even if you don't receive a 1099 but you earned income on the side that's not reported on your W-2 you still need to report that on your taxes. So even if you didn't get a 1099 that doesn't mean you can fly under the radar. There are various types of 1099 that you may see the most popular one is called a 1099 MISC for miscellaneous. You'll get one of these if you're an independent contractor or a freelancer. And the companies that you did business with during the year will report those gross earnings meaning before taxes in box seven of the 1090 MISC.
Another reason you might get a 1099 MISC is that you rent out of space to a business or a government agency and the rent that you receive from those entities will report it on the 1099 MISC. Another funnel reason you might get a 1099 miss is that you entered a sweepstakes and you won a prize or reward, but those winnings have to be reported to the IRS, so you might get one of those. If you received a legal settlement from a lawsuit, you also might get a 1099 MISC. There are other 1099 is out there. For example, there's a 1099 B, and this is going to come from your brokerage firm. If you sold stock or other securities during the year, whether you got a gain or a loss at 1099 B gives you the information you need to accurately report the sale. That would include the date you bought, the security, the date you sold it, and the amounts you paid when you bought and sold it.
There's also a 1099 C if you had a car debt or mortgage forgiven during the year by your lender, that amount could be considered taxable income and is reported on the 1099 C and there's a 1099 div. You'll get this form if you receive stock dividends or a mutual fund capital gains distribution during the year. There's also a 1099 G. If you got a tax from your state last year, the state will report that amount on a 1099 G don't worry, your state tax refund is only taxable if you itemize your taxes the previous year. There's also a 1099 K. This is if you have a substantial online sales business. Say you sell Legos on eBay or you sell handmade tee shirts on Etsy, you might get a 1099K reporting your gross sales. Uber drivers may also get one remembered to take any business deductions from the gross amount on the 1099K before reporting your income on your tax returns.
Another reason you might get a 1099 K for all you cryptocurrency investors out there is if you sold or bought crypto last year, but not all investors would get one. You have to make at least $20,000 in gross transactions or at least 200 transactions before you might get a 1099 K. otherwise, cryptocurrency investors are on their own reporting their gains or losses to the IRS, and then there's a 1099R if you received a distribution from your retirement account during the year, you will receive this type of form. Remember, the IRS also gets a copy of the 1099 so it knows what you should be reporting. So there's no reason to fudge those numbers. And again, if you didn't receive a 1099 but still earn money such as through crypto sales, you still need to pay taxes on that income. Otherwise, the IRS might be at your door.
That's all for 1099’s. thank you for listening. This is taxes made simple from Yahoo finance and turbo tax. Please head over to Apple podcast and leave a five-star rating and review there. Until next time, thanks for listening.
