The term "1099 reportable" means that money you have earned or paid needs to be reported to the IRS using a 1099 form such as 1099-NEC or 1099-MISC. During your career, you might work for a company or own your own small business and need to issue a company or individual who does work for you a 1099, also sending a copy to the IRS.
If you work as a freelancer, gig worker, contractor, sole proprietor or small-business owner, you might receive one or more 1099-NECs from clients. Reviewing the 1099 meaning and what needs to be reported on a 1099 will help you understand when you need to issue or receive one.
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1099 vs. W-2
When you work as an employee, you receive a Form W-2 at the end of the year showing what you earned and what was deducted from your paychecks. You use this document to prepare and file your tax return.
If you receive 1099-reportable income, you should receive a 1099. This helps you to confirm what the company or person has reported to the IRS as income paid to you. The issuer does not deduct any taxes, and the 1099 just shows the gross amount you received.
Consider also: W-2 Forms: What It Is, Who Gets One & How It Works
When to Issue a 1099
Non-employee compensation is the most common form of 1099-reportable income, although there are other forms. If you regularly use the same contractor or purchase from the same business and you pay $600 or more in goods or services annually from them, you might be required to file a 1099-NEC with the IRS and send the vendor a copy.
For example, if you hire a bookkeeper to come in weekly or monthly to do your payroll or bank reconciliations, that person is not an employee, but is a vendor or supplier who needs to receive a 1099-NEC.
Consider also: What Is a Schedule C Form: Who Needs to File & How to File
Receiving a 1099
Much of the freelance and contract work you do, or the work your small business might do, can be classified as 1099 reportable. For example, if you do graphic design work for a local business or sell sports team uniforms to a local high school, that's probably 1099-reportable income.
Not all contract work you do is 1099-reportable. For example, if you do landscaping for a private homeowner or do pet-sitting for a person, that's not 1099-reportable income. Typically, 1099s are issued to people doing business-related work. However, there are a variety of other types of income you can receive that trigger a 1099.
These include money earned from rent, royalties and some investment income reported on 1099 forms. Review all of the income you receive during the year with a tax professional to determine if you should have received a 1099 for it, and what kind (there are more than a dozen different versions of Form 1099).
If not, contact the payor and request one (submitting a Form W-9 for yourself). Even if you don't need to receive a 1099 for some work you do, you must declare all taxable income you receive.
The Role of a W-9
In order for a business to issue you a 1099, it will need your name, mailing address and Tax Identification Number, which is either your Social Security number (if you're working as an individual) or Employer Identification Number (if you have a business).
You give this information to the person or business hiring you using a Form W-9. If you refuse to give your client a W-9, they might be required to withhold taxes from what they owe you, explains the IRS.