You can’t use the 1099-MISC form for payments you make to nonemployees (independent contractors and others who provide services to your business). You must file Form 1099-NEC (for nonemployee compensation) to report these payments.
Who Uses Form 1099-MISC?
If you are in a trade or business, you must use 1099-MISC forms to report the amount you have paid to others during the year. The IRS considers “trade or business” to include:
Operating for gain or profit A non-profit organization, including 501(c)3 and (d) organizations A trust of a qualified employer pension or profit-sharing plan A non-exempt farmers’ cooperative A widely held fixed investment trust
Who Receives a 1099-MISC Form?
Use Form 1099-MISC to report payments of $600 or more to a specific payee for the year (exceptions below). This is a list of the most common types of payees:
Rents: Payments to rent or lease space, to the owners of that space (not real estate agents or property managers), and payments for machine rentals Prizes and awards: The fair market value of merchandise awards, but not from wagers Medical and health care payments: Payments to health care providers and medical or health care service providers Attorneys: Payments to attorneys for gross proceeds (from a lawsuit settlement, for example), but not for attorney legal fees (those are reported on Form 1099-NEC)
Exceptions to the Minimum $600 a Year Regulation
Royalties: Payments of at least $10 during the year to owners of a property (including intellectual property) for use of that property Backup withholding: All withholding from anyone from whom you withheld money as a result of a backup court order, even if it’s less than $600. Report backup withholding from nonemployees on Form 1099-NEC. Direct sales: Sales of at least $5,000 of consumer products for resale anywhere other than a permanent retail establishment. Enter an “X” in the checkbox; don’t enter a dollar amount. All excess golden parachute payments: Amounts over average annual compensation for services included in the individual’s gross income over the past five years
Don’t use Form 1099-MISC to report payments to:
Employees—use Form W-2 for all types of payments to employees Nonemployees (with some exceptions) Corporations (with some exceptions) Pay for merchandise, telegraphs, telephone, freight, storage, and other similar items
How Do I Fill Out Form 1099-MISC?
The 1099-MISC is a multi-part form with these parts:
Copy A (in red) for the IRSCopy 1 for the state tax departmentCopy B for the recipient
The information on a 1099-MISC form is in two parts: The form also includes a checkbox for the Foreign Account Tax Compliance Act (FATCA) filing requirement. This box applies to the FATCA reporting on foreign assets that may be subject to withholding. If you aren’t sure about FATCA reporting, check with your tax professional. In order to complete this form, you’ll need information from each payee. You must get a Form W-9 from payees to verify the payee’s identity and especially to get their taxpayer ID number. Enter the amounts you paid to that payee in the correct box (see above), based on the type of payments you made, in Boxes 1-15. Box 4 is for any federal income tax you withheld from that payee, usually only for backup withholding. Boxes 16, 17, and 18 are for state income tax purposes.
Form 1099-MISC vs. Form 1099-NEC
Order the forms from the IRS Use business tax preparation software versions that include this form Have your tax professional prepare these forms from your information
How Do I File Form 1099-MISC?
You can file your 1099-MISC forms with the IRS through the Filing Information Returns Electronically (FIRE) system. You must file electronically if you are filing 250 or more 1099-MISC forms in a year. You may submit your 1099-MISC forms to the IRS by mail if you are filing fewer than 250 forms. If you are filing a paper form, you must include Form 1096 summarizing all the 1099-MISC forms you’ve prepared. Mailing addresses are on page 7 of the IRS document General Instructions for Certain Information Returns.
Due Dates for Form 1099-MISC
All 1099-MISC forms must be submitted to the payee by Feb. 28 of the following year, so they can use the form to prepare their income taxes. You must file Form 1099-MISC with the IRS by Feb. 28 of the following year, if you file on paper, or by March 31 if you file electronically.
What Are the Penalties for Not Filing This Form?
If you don’t file Form 1099-MISC with the IRS by the due date, you can be penalized. You may also get a penalty if you filed on paper when you were required to file electronically, if you failed to report a taxpayer ID or it was incorrect, or if you use a paper form that’s not machine-readable. The penalty is applied for each form and it’s based on when you file and if the information is correct. Small businesses (under $5 million in gross receipts) may have lower penalties if they can show reasonable cause for the delay.
