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A 1099 form is a type of tax document which is used to record income received from someone or something other than your employment. When you are paid money that is not deemed salary, wages, tips, or withholding, the person who is paying you must disclose the information to the IRS. As a result, the IRS will be aware of if there is a disparity between income reported on tax returns and income recorded in their databases.
A 1099 form is only sent to taxpayers who earn income other than wages, salaries, or tips recorded on a W-2 form. The type of income will determine which 1099 form is delivered.
1099 forms are used to report income obtained from sources other than an employee’s normal salary, such as bank interest, investment profits, or money for freelance labor.
Receiving Form 1099 does not imply that taxes are due on the income reported. Some or all of it may be tax-free or sheltered, such as HSA payouts used for eligible medical costs, or it may be offset by deductions. 1099 income, on the other hand, will need to be reported in many locations on a tax return.