Taxes 2020: What is a 1099 and why would you get it?

It’s the time of year when you get a bunch of tax documents in the mail.

You may recognize your W-2, but you may also receive a variety of 1099 forms that are just as important when it comes to filling out your tax returns correctly.

These forms are broadly known as information returns and are generally used to report non-employee income, such as gross receipts or other types of income. 

“The thing to know about 1099s is, if you receive one or not, you should still keep your own records on how much money you made and report it on your taxes,” Logan Allec, tax expert and a certified public accountant told Yahoo Money.

Here are the various types of 1099s coming your way and why.

Form 1099s are information returns and are generally used to report non-employee income. (Photo: Getty Creative)

1099-MISC

The most common 1099 is the 1099-MISC. You’ll get one or more of these if you’re an independent contractor or freelancer. The companies that you did business with during the year will report your gross earnings — meaning before taxes — in Box 7 of the 1099 MISC.

You may also receive a 1099-MISC if you rent out a space to a business or government agency, which will report the rent you received in Box 1.

If you entered a sweepstakes and won a prize or reward, those winnings would also be reported on a 1099-MISC, according to Nathan Rigney, lead tax research analyst at H&R Block. You may also get the form if you receive a legal settlement from a lawsuit, he said.

Other 1099s

There are other 1099s you could find in your mail. They include: 

1099-B: This comes from your brokerage firm if you sold stock or other covered securities during the year — whether at a gain or loss. The form includes the information you need to accurately report the sale, including the date you bought the security, the date you sold it, and the amounts you paid when bought and sold it. 

1099-C: If your lender forgave a car debt or mortgage during the year, that amount may be considered taxable income and is reported on this form. 

1099-DIV: You’ll get this form if you received stock dividends or a mutual fund capital gains distribution during the year. 

The Internal Revenue Service gets a copy of the 1099s you receive, so it knows what to look for on your tax return. (Photo: Getty Creative)

1099-G: If you got a tax refund from your state last year, the state will report it on this form. Your state refund is taxable only if you itemized your taxes the prior year.

1099-K: If you have a substantial online sales business, say on eBay or Etsy, you may get this form reporting your gross sales. Rideshare drivers may also get one. Remember to take any business deductions from this gross amount before reporting your income on your tax returns.

If you made enough cryptocurrency transactions during the year — $20,000 in gross transactions or at least 200 transactions — you may get a 1099-K reporting that information.

1099-R: If you received a distribution from your retirement account during the year, you’ll receive this type of 1099.

Remember: The Internal Revenue Service (IRS) gets a copy of the 1099s you receive, so it knows what to look for on your tax return. Even if you don’t receive a 1099 but still earned money — such as through crypto sales — you still have to pay taxes on that income. Otherwise, the IRS could come knocking.

Janna is an editor for Yahoo Money and Cashay. Follow her on Twitter @JannaHerron.

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