What is the purpose of IRS Form 1099?

The purpose of IRS Form 1099 is to report various types of income other than wages. This form is utilized to document income received from sources other than an employer, which may include freelance work, interest income, dividends, rental income, and other earnings. The 1099 series consists of multiple forms, such as 1099-MISC and 1099-INT, each designed to report specific types of income. By issuing a Form 1099, payers help taxpayers accurately report their income and fulfill their tax obligations.

Understanding this function of the 1099 forms is essential because it highlights the breadth of income types that are taxable, reinforcing the concept that not all income is reported on a W-2, which is specific to wages from employment. This knowledge aids taxpayers in identifying all income sources that must be reported on their tax returns, ensuring compliance with tax laws.