What Are 1099 Tax Forms?

The Internal Revenue Service uses Series 1099 forms to gather information about individual taxpayers. There are numerous types of 1099 forms, but the purpose of them is the same: to provide information so the IRS can review your tax return. Among the most common 1099 forms are forms that show amounts paid to independent contractors, amounts paid in interest on bank savings accounts or certificates of deposit, Social Security benefit statements, mortgage interest statements and proceeds from real estate transfers.

Function

A 1099-S form is used to report the details of a real estate transaction. Similarly, at the end of the year, your bank might file a 1099-INT with the IRS--and also send you a copy--describing the amount of interest income your bank account earned during the year. If you work for someone as an independent contractor, meaning you are not a regular employee, that person will file a 1099-MISC to report your miscellaneous income. In this case, the 1099 substitutes for the Form W-2 that you would receive if you were an employee instead of a contractor.

Do You Need to File a 1099?

Generally, you do not need to file a Form 1099 with the IRS. The person or institution responsible for the event that triggers the need for the 1099 form will send it to the IRS and send a copy for you to use in filing your income tax return. For example, your mortgage lender will send you a 1099 form at the end of the year that shows the amount of mortgage interest you paid during the year. Your student loan service will send a similar 1099 reporting the amount of student loan interest you paid during the year. The IRS will compare the information from the 1099 with the information that you include on your tax return.

Benefits

Because a 1099 form accurately reports the information you need for your tax return, it saves you the trouble of trying to account for those transactions yourself.

Warning

If the numbers you report on your tax return don't match the numbers on the 1099, you might trigger an audit. For example, if you claim a deduction for $6,000 in mortgage interest paid during the year, but your lender only reports $4,800 in total interest paid during the year on the 1099, the IRS will want to know about the discrepancy.

Time Frame

You can expect your 1099 forms to be mailed to you early in the year, by February at the latest. You should always wait for all 1099 forms you know you need before you file your tax return.