IRS form 1099 can have many uses. A 1099 is sent to you by a bank for interest. A 1099 can be used to report dividends from investments. A 1099 can also be used by a company to report payments to freelancers and consultants. A company employee gets a W-2, anyone else gets a 1099.
I am going to get a 1099 this year for writing I did on a website. My income from the site was not huge, but it is high enough that it is being reported to the IRS. If you have outside income that comes on a 1099, you need to plan for it.
1099 income is taxed just like W-2 income. The biggest difference is that the 1099 payments do not have all of the withholdings of a W-2. When you get your paycheck, taxes and social security are already taken out. When you get 1099 income, you have to cover that in April.
Depending on your tax bracket, the 1099 taxes may be different. Either way, it is reported and you are responsible to pay it. Make sure to include 1099 income in your taxes or an audit may be in your future.
