About 1099 Requirements

By Susan Kerr

You’ve received a mysterious document with the number “1099” on it. There are some intriguing letters after the number–INT, MISC, SA, or something else. If you’ve never encountered one of these important pieces of paper, you need to know what that number and those letters mean.

If you are part of the growing number of people who are telecommuting or making extra money on the side from a hobby or interest, you need to understand what a 1099 means to you. If you lost your house this year, you need to know how the 1099-A applies to you. If you receive interest income or have paid interest, you need to know the implications.


The Internal Revenue Service has designed the 1099 tax forms for ease in tracking financial transactions. In a nutshell, the 1099s give the IRS a means of capturing a snapshot of the more nontraditional financial events in the economy and can adjust its books accordingly. Our changing economy has seen the growth of the self-employed or contract worker. These workers do not fall under the general guidelines for traditional employees who work at a documented hourly or salaried rate. Similarly, those who have experienced a gain or a loss in their investments will receive a 1099-INT. Anyone who has lost a home due to the mortgage crisis will probably be receiving a 1099-A, as will those who subsequently bought the house or mortgage.


There are 12 types of 1099 forms. The following are the most commonly encountered.

1099-MISC for contractors and freelancers.
1099-INT for interest income.
1099-OID for original issue discount is received, usually from transactions related to mortgages served by the Federal Housing Authority.
1099-DIV for dividends payable to holders of mutual funds, brokers, or investment firms. Reports dividend income paid as the result of business profit.
1099-SA is used to deduct distributions from a medical or health savings account.


It is quite common to think 1099s mean you owe Uncle Sam some income tax. If you work as a contractor or a freelancer, congratulations. At least you have the satisfaction of knowing that your business is successful, even if only marginally so.

On the other hand, a 1099 may also mean you don’t owe taxes. It just means you have made some sort of financial transaction during the tax year, whether you paid interest on a student loan or you are elderly and have begun using your long-term care benefits.

No matter the reason for receiving a 1099 in the mail, the forms all resemble one another. Only the letters in the suffix vary to identify what kind of transaction has been recorded by the IRS.


It is important to be absolutely certain of the type of 1099 you receive. You will need this information at tax time, whether for reporting income or for writing off certain expenses.

If you are still paying your student loans, the 1099-INT will be useful for deducting the interest from your tax bill. If you had to move out of your home because you were caught in the mortgage mess, a 1099-A will record your abandonment of the property. Check with a tax professional for the particular guidelines.

Actually, that is good advice for everyone. If you receive a 1099 and do not understand its use or implications, ask a professional. There are many good sites on the Internet but a good tax professional is your knight in shining armor if you are audited.

A contract or freelance worker is issued a 1099-MISC if he earns $600 or more. Each time he works for a different client, the 1099 “clock” is reset. Therefore, it is likely that a freelance worker will receive several 1099-MISC each year.


File those 1099s away and guard them with your life for several years. They provide concrete proof of the types of transactions that took place during a particular tax year. Do not forget to include any 1099-MISC on your income tax if you are self-employed. The truth may set you free–but not from your IRS tax obligations. If your tax return is flagged for an IRS audit, you will wish you had all the supporting documentation at your fingertips.