Form 1099 is a family of IRS information returns that US businesses and financial institutions use to report income paid to non-employees during the tax year. Unlike Form W-2, which reports wages for employees, the 1099 series captures payments to contractors, freelancers, and others outside the payroll. The payer files the form with the IRS and sends a copy to the recipient, who uses it to report the income on their own tax return.
Common types of Form 1099
There are more than twenty variants of Form 1099, each covering a specific type of income. The ones most relevant to employers and contractors are below.
- 1099-NEC: Non-Employee Compensation, used to report payments of $600 or more to independent contractors and freelancers.
- 1099-MISC: Miscellaneous Information, used for rent, royalties, prizes and awards, and other miscellaneous income not covered by other 1099 variants.
- 1099-INT and 1099-DIV: used by banks and brokerages to report interest income and dividends paid during the year.
- 1099-K: Payment Card and Third-Party Network Transactions, issued by payment processors such as PayPal, Stripe, and major card networks.
- 1099-R: Distributions from pensions, annuities, retirement plans, and IRAs.
Who files Form 1099?
- US businesses paying contractors: any business that pays a US contractor $600 or more in a calendar year files a 1099-NEC for that recipient.
- Financial institutions: banks, brokerages, and mutual funds file 1099-INT and 1099-DIV for account holders who exceed reporting thresholds (typically $10).
- Payment processors: third-party platforms file 1099-K based on annual gross payment thresholds that are tightening over time.
1099 vs W-2
| Aspect | Form 1099 | Form W-2 |
|---|---|---|
| Issued to | Independent contractors and non-employees | Employees on payroll |
| Tax withholding | None; recipient pays their own | Employer withholds federal, state, FICA |
| Benefits | Not provided by payer | Provided as per employer policy |
| Filing deadline | 31 January (most variants) | 31 January |
The line between 1099 and W-2 is also the line between contractor and employee, and getting it wrong is one of the most common forms of worker misclassification in the US.
Hiring contractors across the US and India?
Wisemonk handles compliant contractor onboarding, classification, and payments across the US, UK, and India under one Agent of Record service.
Ready to build your India team?
Tell us who you're looking to hire. We'll walk you through exactly how the setup works for your company, your timeline, and your budget.