Tax Information Reporting: The Basics of 1099

Brock Sorensen
August 14, 2023

All types of businesses are subject to reporting earnings on the 1099 form series. Tax information reporting 1099s can be a complex process, especially when you must report more than one type of 1099 form. There are also many different parts of the reporting process that can be confusing, including knowing what 1099s to report, the differentiating due dates, accounting for state filings and more. In this blog we will break down all the basics of tax information reporting.

What is tax information reporting?

Tax information reporting is the reporting of wage and non-wage payments made from businesses to employees, contractors and other recipients made throughout the course of a calendar year. Businesses are subject to report this information federally to the IRS and to any state jurisdictions they have reporting obligations in.

The U.S. government is largely funded on individual income taxes. That is, taxes reported on forms like Form W-2, 1099-MISC, 1099-NEC, 1099-K, etc. The taxes being reported on these information forms bring in over 49% of the government’s revenue, totaling over $1.83 trillion dollars. Businesses in all different industries may need to report one or more Form 1099, depending on the services performed. Tax information reporting can become a complex process because each form has guidelines to when it needs to be reported to the IRS and state jurisdictions.

What are the most common tax information reporting 1099 form types?

There are over 30 different 1099 forms that are reported to the IRS and states each year, and each form reports a different type of income. Some of the most common form types are:

  • 1099-D: Reports distributions such as dividends, capital gain on investment or nontaxable distributions paid on stocks or liquidation distributions.
  • 1099-INT: Reports interest earned. For example, if you earn money in a savings account, cash in a savings bond, etc.
  • 1099-K: Reports payments from payment card or third-party network transactions. For example, as a driver for a ride-share company, those funds would likely be reported on the 1099-K form.
  • 1099-MISC: Reports rents or royalty payments, prizes and awards that are not for services, payments to a physician, gross proceeds to attorneys, etc.
  • 1099-NEC: Reports payments for services performed for a trade and/or business by contractors or other individuals not treated as employees (prior to 2020, this amount would have been reported on 1099-MISC, box 7).
  • 1099-R: Reports distributions from pensions, annuities, retirements, and other retirement accounts.
  • 5498: Reports all contributions to any individual retirement arrangement (IRA).

When are 1099 forms due to recipients? What about the IRS?

The majority of 1099 forms will be due to recipients at the end of January, with 1099-B and 1099-S being the outliers. This is because recipients need all of their tax information to file their own individual tax returns.

When transmitting forms to the IRS, the majority of forms are due by March 31, except the 1099-NEC and Form W-2, which are both due to the IRS on January 31. These due dates are if your business electronically files with the IRS. If you submit paper files, due dates for 1099 forms will be earlier.

The expansion of electronic filing

In recent years there has been a large increase in electronic filing mandates at both the federal and state level for tax information reporting. For 2023 reporting, IRS release T.D.9972 states that all organizations that file 10+ information returns must do so electronically. This includes Forms W-2, 1099, 1095, 1042-S and more.

When businesses electronically file their tax information, it allows the IRS to get the information must faster than they would via other filings methods (i.e., paper, CD, etc.). The expansion of electronic filing has been happening for many forms over the past decade and is expected to continue for state reporting obligations.

1099 direct state reporting

Tax information reporting does not only happen with the IRS. Over 40 states have reporting obligations for one or more 1099 form. State reporting for 1099s can get much more complex than filing with the IRS. This is because when filing with the IRS, you only need to pay attention to one due date, filing method and threshold per form. With direct state reporting, each state has the ability to set different due dates, filing methods and thresholds for every 1099 form.

Take Action

Watch our recent webinar, 1099 Reporting Basics, to learn more about what your business must do to stay compliant.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Brock Sorensen

Brock Sorensen is a product marketing specialist at Sovos, working in the Tax and Regulatory Reporting line of business. Brock graduated from the University of Minnesota with a BA in Psychology and Communication. Outside of work, Brock enjoys running, walking his dog and spending time with friends and family.
Share this post

North America Tax Information Reporting
March 22, 2024
Market Conduct Annual Statement Reminders and More

On the second Wednesday of each month, Sovos experts host a 30-minute webinar, Water Cooler Wednesday, to share the latest updates on statutory filings. In March, Sarah Stubbs shared information about the many filings due after March 1, from Market Conduct Annual Statements to health supplements for P&C and life insurers writing A&H businesses and […]

North America ShipCompliant
March 21, 2024
How Producers Can Build a DtC Shipping Market

Direct-to-consumer (DtC) shipping has become one of the leading sales models for businesses of all sizes and in all markets. The idea of connecting directly with consumers is notably attractive, as it helps brands develop a personal relationship and avoid costly distribution chains. Yet, for all its popularity, DtC is often a hard concept to […]

North America ShipCompliant
March 20, 2024
Key Findings from the 2024 DtC Beer Shipping Report

This March, Sovos ShipCompliant released the fourth annual Direct-to-Consumer Beer Shipping Report in partnership with the Brewers Association. The DtC beer shipping report features exclusive insights on the regulatory state of the direct-to-consumer (DtC) channel, Brewers Association’s perspective and key data from a consumer preferences survey. Let’s take a deeper dive into some of the […]

March 20, 2024
As the World Gets Smaller, Think Bigger About Global Tax Compliance

For the past few weeks back, my colleagues and I have been talking a lot about the importance of a global strategy when it comes to addressing today’s modern tax environments. On the heels of Sovos introducing the Sovos Compliance Cloud, many in our company’s leadership team have blogged about related topics and the critical […]

North America ShipCompliant
March 12, 2024
Florida HR 583 Set to Uncork Larger Format Wine Bottles

This bill was signed into law on March 28, 2024 and takes effect July 1, 2024. Florida wine lovers could soon enjoy a bigger selection of bottles based on a recent bill passed by the state’s legislature (HR 583) that would remove the existing cap on wine bottle sizes. What is Florida’s HR 583 bill? […]