Information Return Definition

Every tax season, one of the commonly heard terms is the information returns. Regardless of your income, you will need these documents to prepare and file your federal income tax return. The purpose of information returns is to report the income you’ve earned during the tax year.

There are numerous information returns; not just a single one. One of the most commonly used information returns is the W-2 which reports income earned from employment. If you only have self-employment income, you won’t need this document as it is only filed by employers.

In these cases, you will need to use the 1099 information returns. It could be 1099-MISC or 1099-NEC that your payers filed. Other unearned income like interest or dividends is reported using 1099-INT and 1099-DIV, respectively. There are a bunch of other tax forms that financial institutions and companies file to report income paid.

It boils down to the nature of the payment and you, as a taxpayer, who is on the receiving side of the payment, won’t need to do anything as far as filing the tax forms. However, if you’re a business that’s rolling out payments to non-employees and even employees for that matter, it’s best to use a business management software that files tax forms automatically.