What Is a 1099-MISC?
If you’re an independent contractor, you’ve likely heard of the 1099-MISC form and asked yourself “What is a 1099-MISC?” Stride is here to explain everything you need to know about the 1099-MISC form so you are ready to tackle tax season.
What Is a 1099-MISC Form?
There are 15 different types of 1099 forms and the 1099-MISC is just one of them! The 1099-MISC is a form that reports how much you’ve been paid by a company. 1099-MISCs are only sent to nonemployee individuals. Put simply, the 1099-MISC is used by companies to report how much they’ve paid independent contractors. For example, if you deliver for Postmates, you’re considered a contractor instead of an employee; Postmates reports their payments to you for the year with a 1099-MISC instead of a W-2.
Who Will Receive a 1099-MISC?
If you work as an independent contractor, you are eligible to receive a 1099-MISC. However, a company is only required to provide you with a 1099-MISC if you’ve received at least $600 in payments in a given tax year. While the company you work for might issue you a 1099-MISC if you don’t meet this $600 threshold, it is not required to.
What Companies Will Provide a 1099-MISC?
Some of the most popular gig economy companies provide 1099-MISCs. Some of these companies include:
And many more!
Keep in mind, companies are only required to issue a 1099-MISC if you meet the requirements mentioned above.
When Will I Receive My 1099-MISC Form?
Just like other 1099 forms, your 1099-MISC needs to be postmarked by January 31 at the very latest. This means you should have it in your hands by early February!
What Is the Difference Between a 1099-MISC and 1099-K?
While the 1099-MISC and 1099-K both report business income you received during the tax year, they are two different forms. The primary differences are as follows:
Form 1099-MISC reports payments to independent contractors, but isn’t limited to only reporting payments to you by a third party like form 1099-K is. If your company pays you directly for your goods or services, it will issue a 1099-MISC. If your company facilitates payments to you on the buyer's behalf, it will issue a 1099-K.
The threshold for receiving a 1099-K is much higher than that of a 1099-MISC. In order to receive a 1099-K, the company that processes payment for you must facilitate 200 or more transactions for you AND these transactions must total $20,000 or more.
On a 1099-K, you will see the gross amount of transactions processed on your behalf. This means that the number you see includes fees, commissions, etc. Your 1099-MISC will not include these.
If this seems confusing, don’t stress! It isn’t your responsibility to determine which form you receive! A good rule of thumb you can follow to differentiate these two forms it that, in general, freelancers and contractors will receive a 1099-MISC and freelancers working in the on-demand economy will receive a 1099-K.
How Do I Use My 1099-MISC When I File My Taxes?
The most important box that you’ll use on this form is Box 7. This box is titled “Nonemployee compensation” This is the total you’ll use when calculating your business profit or loss on the Schedule C. This number will go on Part I, Line 1 of your Schedule C.
Keep in mind that you need to pay taxes on this income!
I Spotted a Mistake on My 1099-MISC; What Now?
First, make sure you’ve double-checked that the total reported on your 1099-MISC in Box 7 equals the total amount of payments you have on record. To do this, you should add up all the money that was sent to your bank account. This should match what your 1099-MISC shows. If it doesn’t, reach out to the company quickly to have your form corrected.
Additionally, if the IRS sends a notice about underreporting on your 1099-K form due to the mistake you found, here’s what to do:
Respond within the amount of time allowed in the letter.
Provide an explanation as to why you reported the amount of income you did on your Schedule C.
If you filed your tax return before your 1099-MISC was corrected, provide that as your reasoning. Pro tip: It is best to not file your tax filing until your 1099-MISC is corrected.
Seek a tax professional to help you through the process if you need further assistance.
Have a 1099-MISC question we didn’t cover? Send it our way at firstname.lastname@example.org.
Disclaimer: The information contained in this Guide is not offered as legal or tax advice. The U.S. federal income tax discussion included in this Guide is for general information purposes only and is not a complete analysis or discussion of all potential tax consequences that may be relevant to a particular individual. In light of the foregoing, each individual should consult with and seek advice from such individual’s own tax advisor with respect to the tax consequences discussed herein. Any information contained in this Guide is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the U.S. Internal Revenue Code of 1986, as amended.