What Is a 1099 and What Do I Do With It?

Q: What's the difference between a 1099 and a W-2?

A W-2(/what-is-w2) is for employees — taxes are withheld by the employer. A 1099 is for non-employee income — you're responsible for paying the taxes yourself. Employees and contractors also differ in how payroll taxes(/what-are-payroll-taxes) work.

A 1099 is a tax form that reports income you received outside of a traditional employer-employee relationship. If someone paid you — but didn’t withhold taxes from your pay the way an employer would — chances are you’ll get a 1099. Understanding the different types and what they mean is essential for filing an accurate tax return and avoiding surprises.

Data Notice: The self-employment and contractor tax data in “What Is a 1099 and What Do I Do With It?” reflects projected 2026 IRS guidance. Platform reporting thresholds and deduction rules change frequently. Verify current requirements with IRS publications. [what-is-1099]

How 1099 Forms Work

Think of a 1099 as an “information return.” The company or person who paid you sends one copy to the IRS and one copy to you. This means the IRS already knows about the income before you even file your return.

Unlike a W-2 (which employees receive), a 1099 usually means no taxes were withheld from the payments. That means you’re responsible for paying the full amount of tax owed — including self-employment tax if the income is from freelance or contract work.

When Do You Get a 1099?

Most 1099 forms must be sent to you by January 31 of the year following the tax year. Some types (like the 1099-B for brokerage transactions) have a deadline of February 15.

If you earned income but the amount falls below the reporting threshold (usually $600 for most 1099 types), the payer isn’t required to send you a form. But here’s the critical point: you still owe tax on that income even if you don’t receive a 1099. The reporting threshold is for the payer, not for you.

Types of 1099 Forms

There are more than 20 different 1099 variants, but most people will only encounter a handful. Here are the most common ones.

1099-NEC: Nonemployee Compensation

What it reports: Payments of $600 or more to independent contractors, freelancers, and self-employed individuals for services performed.

Who gets it: Freelance writers, graphic designers, consultants, gig workers, Uber/Lyft drivers, and anyone who did contract work.

What to do with it: Report the income on Schedule C of your Form 1040. You’ll owe income tax plus self-employment tax (which covers Social Security and Medicare — ~15.3% combined) on the net profit.

You can deduct business expenses on Schedule C to reduce your taxable income. Keep records of everything you spent to earn this money.

For a full walkthrough, see our Form 1099-NEC guide.

1099-MISC: Miscellaneous Income

What it reports: Rent payments, royalties, prizes, awards, crop insurance proceeds, and other miscellaneous income of $600 or more. Also reports payments to attorneys.

Who gets it: Landlords receiving rent from a business tenant, authors earning royalties, contest winners, and others with non-standard income.

What to do with it: Where you report it depends on the type of income. Rental income goes on Schedule E, royalties may go on Schedule C or Schedule E, and prizes are reported as “Other income” on Schedule 1.

Note: The 1099-MISC used to report freelance income, but since 2020 that moved to the 1099-NEC. If you’re a freelancer, you should be getting a 1099-NEC, not a 1099-MISC.

1099-INT: Interest Income

What it reports: Interest income of $10 or more earned from bank accounts, CDs, bonds, and other interest-bearing investments.

Who gets it: Anyone with a savings account, CD, money market account, or bond that paid interest during the year.

What to do with it: Report it on Schedule B (if over $1,500 total) or directly on Form 1040, Line 2b. This income is taxed at your ordinary income tax rate.

Interest from municipal bonds is usually exempt from federal tax and may appear in a separate box on the form.

1099-DIV: Dividends and Distributions

What it reports: Dividend payments of $10 or more from stocks, mutual funds, and ETFs.

Who gets it: Investors who own dividend-paying stocks or funds in taxable brokerage accounts. (Dividends in retirement accounts like IRAs or 401(k)s don’t generate a 1099-DIV.)

What to do with it: Report on Form 1040. Pay attention to the distinction between:

Ordinary dividends (Box 1a) — Taxed at your regular income tax rate
Qualified dividends (Box 1b) — Taxed at the lower capital gains rate (0%, 15%, or 20% depending on your income)

1099-B: Proceeds from Broker Transactions

What it reports: Sales of stocks, bonds, mutual funds, cryptocurrency, and other securities.

Who gets it: Anyone who sold investments through a brokerage account during the year.

What to do with it: Report on Form 8949 and Schedule D. You’ll owe capital gains tax on any profit. The form should show both your proceeds (what you sold for) and your cost basis (what you paid), making it easier to calculate your gain or loss.

Short-term gains (assets held one year or less) are taxed at ordinary income rates. Long-term gains (held over one year) get preferential rates.

1099-K: Payment Card and Third-Party Network Transactions

What it reports: Payments you received through payment processors and online marketplaces — including PayPal, Venmo (business), Stripe, Etsy, eBay, Amazon, and credit card processors.

Who gets it: The threshold has been a moving target. Under current IRS rules, the reporting threshold is being phased down. For 2025 returns (filed in 2026), the threshold is ~$2,500 in gross payments. It’s projected to reach ~$600 eventually.

What to do with it: If the income is from a business, report it on Schedule C. If it’s from selling personal items (like clearing out your garage on eBay), you generally don’t owe tax unless you sold items for more than you paid for them.

Common concern: Getting a 1099-K doesn’t automatically mean you owe tax on the full amount. If you sold personal items at a loss, you can report the income and offset it with your cost basis.

1099-R: Distributions from Retirement Accounts

What it reports: Distributions from IRAs, 401(k)s, pensions, annuities, and other retirement plans.

Who gets it: Anyone who took money out of a retirement account during the year — including required minimum distributions (RMDs), rollovers, and early withdrawals.

What to do with it: Report on Form 1040. The taxability depends on the type of account:

Traditional IRA/401(k) — Generally fully taxable as ordinary income
Roth IRA/Roth 401(k) — Usually tax-free if the account has been open 5+ years and you’re over 59½
Early withdrawals — May be subject to an additional 10% penalty (reported on Form 5329)

Box 7 on the 1099-R contains a distribution code that tells you (and the IRS) what type of distribution it was.

1099-G: Government Payments

What it reports: Unemployment compensation, state tax refunds, and other government payments.

Who gets it: Anyone who received unemployment benefits or a state/local tax refund during the year.

What to do with it:

Unemployment benefits are fully taxable as ordinary income
State tax refunds are only taxable if you itemized deductions in the prior year (if you took the standard deduction, the refund isn’t taxable)

What If You Don’t Receive a 1099?

This is one of the most common tax misunderstandings. If you earned income, you owe tax on it whether or not you receive a 1099.

The payer is only required to send a 1099 when payments exceed the reporting threshold (usually $600). But if someone paid you $500 for freelance work and didn’t send a 1099, you’re still legally required to report that $500 on your tax return.

Keep your own records of all income received, especially if you do freelance or gig work. Your bank statements can help you reconstruct income if needed.

1099 Income and Estimated Taxes

Because 1099 income usually doesn’t have taxes withheld, you may need to make quarterly estimated tax payments throughout the year. The IRS expects you to pay taxes as you earn income — not just once a year.

If you owe more than ~$1,000 in tax at filing time (after subtracting withholding and credits), you could face an underpayment penalty. The quarterly deadlines for 2026 are:

Quarter	Income Earned	Payment Due
Q1	Jan 1 – Mar 31	April 15, 2026
Q2	Apr 1 – May 31	June 15, 2026
Q3	Jun 1 – Aug 31	September 15, 2026
Q4	Sep 1 – Dec 31	January 15, 2027

Use IRS Form 1040-ES to calculate and submit estimated payments. For the full calendar, see our tax filing deadlines guide.

How to Report 1099 Income on Your Tax Return

Here’s a quick reference for where each type flows onto your Form 1040:

1099 Type	Report On	Form 1040 Line
1099-NEC	Schedule C	Line 8 (via Schedule 1)
1099-MISC	Varies (Schedule C, E, or 1)	Varies
1099-INT	Schedule B or direct	Line 2b
1099-DIV	Schedule B or direct	Line 3a/3b
1099-B	Form 8949 + Schedule D	Line 7
1099-K	Schedule C (business)	Line 8 (via Schedule 1)
1099-R	Direct	Line 4a/4b or 5a/5b
1099-G	Direct or Schedule 1	Line 7 (unemployment)

All of this income contributes to your adjusted gross income (AGI), which in turn affects your eligibility for credits and deductions.

Frequently Asked Questions

What’s the difference between a 1099 and a W-2?

A W-2 is for employees — taxes are withheld by the employer. A 1099 is for non-employee income — you’re responsible for paying the taxes yourself. Employees and contractors also differ in how payroll taxes work.

I got a 1099 but the amount is wrong. What should I do?

Contact the payer and ask them to issue a corrected 1099. If they refuse or can’t be reached, report the correct amount on your return and keep documentation to support your numbers.

Do I need to file a tax return if I only have 1099 income?

Yes. If your net self-employment income is $400 or more, you’re required to file a return and pay self-employment tax, regardless of whether you owe income tax.

Can I deduct expenses against my 1099 income?

Yes, if the income is from self-employment or a business. You report both income and expenses on Schedule C. Common deductions include home office expenses, supplies, mileage, software, and professional development.

Will I get audited if I don’t report a 1099?

The IRS’s automated matching system compares the 1099s it receives with your tax return. If there’s a mismatch, you’ll likely receive a CP2000 notice proposing additional tax. It’s not technically an audit, but it can result in penalties and interest. Always report all income.

This what is 1099 article on taxo.com (what-is-1099) is general educational content only — not personalized tax, legal, or financial advice — and readers should consult a qualified CPA, enrolled agent, or tax attorney regarding their individual circumstances before acting on any information presented here, as tax law changes frequently through legislation, IRS regulation, and annual inflation adjustments.