When you earn money that is not taxed you report it with a Form 1099 and pay taxes on it. These taxes may be paid to Federal, State, and Local governments. The most notable form of a 1099 is to report the amount of money paid to independent contractors.

If a business pays more than 600 dollars to a contractor during the course of a year than it must then file a Form 1099. The IRS technically considers contractor payments as nonemployee compensation. This is their way of saying an individual is not an employee but is still getting paid money.

If you are in a business that must file more than 250 of these forms in a year then you must submit them electronically or on magnetic disk (such as a floppy).

If you are the tax payer then you can use the information on your 1099 to fill out your tax return. All of your 1099 transactions from a single year can be combined onto a single 1099 form. Generally you do not need to attach the Form 1099 to your tax return.