A 1099-MISC, “Miscellaneous Information”, is a form used in the U.S. to report certain types of income which isn’t considered regular wages, salaries, or tips. The form is generally used to report payments made in the course of a trade or business to someone who is not an employee. The 1099-MISC is an essential document for tax reporting purposes, ensuring that income is correctly reported to the Internal Revenue Service (IRS).
Per the IRS, you must file Form 1099-MISC for each person to whom you have paid during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Prizes and awards.
- Other income payments.
- Medical and healthcare payments.
- Crop insurance proceeds.
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
- Payments to an attorney.
- Any fishing boat proceeds.
In addition, use Form 1099-MISC to report that you made direct sales of consumer products of at least $5,000 to a buyer for resale anywhere other than a permanent retail establishment.
- Why do you need to file a 1099-MISC?
- Who Needs to File a 1099-MISC?
- Are there any exemptions to filing a 1099-MISC?
- What is the deadline for filing a 1099-MISC?
- What is required to file a 1099-MISC?
- What are the penalties for 1099-MISC?
- Do you need to e-file a 1099-MISC?
- Is state filing required for the 1099-MISC?
- What elements make up a 1099-MISC form?
- Can you correct a 1099-MISC?
Why do you need to file a 1099-MISC?
The 1099-MISC form is a type of information return used in the U.S. to report various types of income that someone receives during the year which isn’t considered regular wages, salaries, or tips. The form is provided by the entity that paid the income to the recipient and a copy is also sent to the Internal Revenue Service (IRS).
- If you pay rent for office space, machinery, equipment, etc., and the recipient is not a tax-exempt organization, you may need to report it on a 1099-MISC.
Prizes and Awards
- If you give non-employees prizes or awards, the value of those prizes might be reportable.
- Payments of $10 or more in royalties, which might include payments for mineral properties or intellectual property like patents, copyrights, and trademarks, are reportable on a 1099-MISC.
Medical and Health Care Payments
- Payments to providers or suppliers for health and medical services may need to be reported, particularly if you’re in the trade or business of providing medical or health care services.
- Fees paid to attorneys for legal services are reportable, even if less than $600.
- There are other types of payments, like fishing boat proceeds, crop insurance proceeds, and payments to an individual, partnership, or estate that might be reportable on a 1099-MISC.
- If backup withholding was taken out of payments, those payments need to be reported on a 1099-MISC regardless of the total amount.
It’s important to remember that the 1099-MISC form is typically not used for personal payments. It’s intended for payments made in the course of your trade or business. Additionally, payments made to corporations are usually exempt from 1099-MISC reporting, with some exceptions (like attorney’s fees).
Who needs to file a 1099-MISC?
The 1099-MISC form is used to report certain types of payments made in the course of a trade or business. If you’re involved in a business or self-employed, you might need to file a 1099-MISC form. Specifically, here are situations where a 1099-MISC might need to be filed:
- Most businesses, including corporations, partnerships, and sole proprietorships, need to file a 1099-MISC if they make qualifying payments. However, most payments made by corporations to other corporations are exempt from this requirement.
- If you operate as a sole proprietor, or if you engage in a trade or business as an individual, you may need to file a 1099-MISC if you make qualifying payments.
Rental Property Owners
- If you’re a landlord and you’ve made certain payments related to your rental activity, you might need to file a 1099-MISC. For instance, if you pay more than $600 to a service provider (like a handyman or a plumber) during the year, you should issue a 1099-MISC.
Are there any exemptions to filing a 1099-MISC?
Yes, there are several situations in which you don’t need to file a 1099-MISC, even if you’ve made payments during the course of your trade or business. Here are some of the exemptions:
Payments to Corporations
- Generally, payments made to C corporations and S corporations are exempt from 1099-MISC reporting. However, there are exceptions, such as payments for legal services provided by attorneys even if they are incorporated.
Payments for Merchandise
- Payments made for tangible goods, telegrams, telephone, freight, storage, and similar items usually aren’t reportable.
Payments to Tax-Exempt Organizations
- Payments made to certain tax-exempt organizations are not subject to 1099-MISC reporting.
Payments for Employee Wages
- Payments made as salaries or wages to employees aren’t reported on 1099-MISC. Instead, they are reported on Form W-2.
Payments to Real Estate Agents or Brokers
- Rent payments made to real estate agents or property managers typically don’t require a 1099-MISC. However, the real estate agent or property manager would be required to provide a 1099-MISC to the property owner.
Payments Made with a Credit Card or Payment Network
- If you pay a service provider using a credit card, debit card, or a third-party payment network like PayPal, you don’t report the payment on a 1099-MISC. The payment settlement entity will use Form 1099-K to report those transactions.
- Generally, payments to foreign payees (non-resident aliens) are not reported on a 1099-MISC. Instead, they are reported on Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding.”
Certain Medicaid and CHIP payments
- Certain payments by the government to vendors under Medicaid and Children’s Health Insurance Program (CHIP) may be exempt.
- If you’re making payments for personal or household purposes and not in the course of your trade or business, you don’t need to file a 1099-MISC. For instance, if you hire someone to mow your lawn or clean your personal residence, and it’s not related to a business you operate, you won’t need to issue a 1099-MISC.
- If you pay someone less than $600 during the tax, you generally don’t need to send a 1099-MISC, although there are exceptions, such as when backup withholding is involved.
What is the deadline for filing a 1099-MISC?
The deadline for filing a 1099-MISC can vary based on the several factors:
Sending to Recipients
- The 1099-MISC form should be furnished to the recipient by January 31 of the year following the payment year.
Filing with the IRS
- If you are filing on paper, the 1099-MISC forms should be submitted to the IRS by February 28 (or the last day of February) of the year following the payment year.
- If you are filing electronically, the deadline extends to March 31 of the year following the payment year.
However, if any of these dates fall on a weekend or a holiday, the deadline may be extended to the next business day. Additionally, if you discover an error after the initial filing, there are separate deadlines for corrected forms.
Remember, missing these deadlines can result in penalties, so it’s crucial to stay informed and act timely.
What is required to file a 1099-MISC?
To file a Form 1099-MISC, you will need certain information about both the payer (the person or business making the payment) and the recipient (the person or business receiving the payment). Here’s what is required to file a 1099-MISC:
Information about the Payer
- Payer’s Name and Address
- Provide your legal business name and mailing address.
- Payer’s Taxpayer Identification Number (TIN)
- This could be your Employer Identification Number (EIN) or your Social Security Number (SSN), depending on your business structure. If you’re a sole proprietor, you might use your SSN; if you’re a business entity, you’d use your EIN.
- Payer’s Phone Number
- Include a phone number where the payer can be reached.
Information about the Recipient (Nonemployee)
- Recipient’s Name and Address
- Provide the legal name and mailing address of the individual or business receiving the payment.
- Recipient’s Taxpayer Identification Number (TIN)
- This could be the recipient’s Social Security Number (SSN) if an individual or their Employer Identification Number (EIN) if a business entity.
Form specific information
- No form specific data is required, however some information should be added to justify the submission of the 1099-MISC form. The fields with amounts will vary based on the situation.
What are the penalties for 1099-MISC?
Please see the penalties section for details.
Do you need to e-file a 1099-MISC?
Please see the e-file section for details.
Is state filing required for the 1099-MISC?
Please see the state filing section for details.
What elements make up a 1099-MISC form?
The 1099-MISC form contains several boxes, each designed to report specific types of income or information. Here is a breakdown of the boxes on the 1099-MISC:
- Box 1: Rents
- For reporting rent payments made for office space, machines, land, or other property.
- Box 2: Royalties
- For reporting royalty payments, such as those from oil, gas, or mineral properties, copyrights, or patents.
- Box 3: Other Income
- Used for other types of income that don’t fit in any other box, like prizes, awards, stipends, or other taxable benefits.
- Box 4: Federal Income Tax Withheld
- Shows backup withholding or withholding on gaming profits.
- Box 5: Fishing Boat Proceeds
- Income received as a crew member of a fishing vessel.
- Box 6: Medical and Health Care Payments
- Payments of $600 or more made to physicians or other suppliers or providers of medical or health services.
- Box 7: Payer Made Direct Sales of $5,000 or More
- Indicates if the payer made direct sales of $5,000 or more of consumer products for resale, on a buy-sell, deposit-commission, or any other basis.
- Box 8: Substitute Payments in Lieu of Dividends or Interest
- Amounts received by a broker for you as a result of loaning your securities.
- Box 9: Crop Insurance Proceeds
- Payments to farmers by insurance companies.
- Box 10: Gross Proceeds Paid to an Attorney
- Typically, this relates to legal settlements.
- Box 11: Fish purchased for resale
- Cash payments for the purchase of fish for resale
- Box 12: Section 409A Deferrals
- Amount deferred during the year for certain deferred compensation plans under Section 409A.
- Box 13: FACTA (Foreign Account Tax Compliance Act)
- FATCA requires reporting on payments made to foreign entities.
- Box 14: Excess Golden Parachute Payments
- Amounts that are considered "excess parachute payments" and are subject to a 20% excise tax.
- Box 15: Nonqualified Deferred Compensation
- Shows the total amount of nonqualified deferred compensation (NQDC) that is taxable under Section 409A because the NQDC plan fails to satisfy the requirements of Section 409A.
- Box 16 – State tax withheld
- If the payer withheld any state income tax on behalf of the recipient, the amount is reported in this box.
- Box 17 – State/Payer’s state no
- This box indicates the state for which the income and tax details are being reported. It will also include the payer’s state identification number, which is an identifier assigned by the state’s revenue or taxation department.
Please see the state filing section for details.
- Box 18 – State income
- This is where the amount of nonemployee compensation related to that specific state is reported. If a recipient earned income in multiple states from the same payer, they might receive multiple 1099-NEC forms, each one showing the amount of income and tax details related to a specific state.
Remember, not all boxes will be filled out on every 1099-MISC form. Only the relevant boxes for the specific payments made will have amounts or indicators.
Can you correct a 1099-MISC?
Yes, you can correct a 1099-MISC. Please see the corrections and negations section for details.