Form 1099-MISC Instructions & Tax Reporting Pointers

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The Purpose of Filing Form 1099-MISC

The most common 1099 form, the 1099-MISC, is used to report payments of $600 or more to service providers — typically work done by an independent contractor who is a sole proprietor or member of a partnership. Examples include graphic designers, Web developers, cleaning professionals, freelance writers, landscapers and other self-employed individuals. Basically, the 1099-MISC form is to independent contractors what the W-2 is to employees. Of the more than 15 types of 1099s, small businesses use the 1099-MISC most often.

Who Gets a 1099-MISC?

The 1099-MISC captures non-employee compensation, in addition to documenting that you didn’t deduct any federal, state or other taxes. Unlike employees with W-2s, independent contractors get their full pay without any automatic deductions. It’s up to them to keep track of their taxes and pay them directly to the government.

Other payments covered by the 1099-MISC include:

  • At least $10 in royalties, such as payments to authors, musicians and artists
  • At least $10 in broker payments in lieu of dividends or tax-exempt interest
  • Rents, such as office space and machine rentals, when paid to owner
  • Prizes and awards
  • Services (including parts and materials)
  • Medical and health care payments
  • Cash payments to fishermen
  • Crop-insurance proceeds
  • Payments to attorneys
  • Any direct consumer-product sales of at least $5,000 to a buyer for resale anywhere other than a permanent retail establishment

Get more tips on how to determine who gets a 1099-misc form here

Basic 1099-MISC Filing Instructions

To complete a 1099-MISC, you’ll need to supply the following data:

Business information – Your Federal Employer ID Number (EIN), your business name and your business address.

Recipient's ID Number – The recipient's Social Security number or Federal Employer ID Number (EIN).

Payment Amounts – Enter amounts paid in the appropriate box:

  • Rents
  • Royalties
  • Other Income
  • Fishing-boat proceeds
  • Medical and health care payments
  • Non-employee compensation
  • Substitute payments in lieu of dividends or interest
  • Direct sales of $5,000 or more of consumer products for resale
  • Crop-insurance proceeds
  • Excess golden-parachute payments
  • Gross proceeds paid to an attorney

Federal Income Tax Withheld - Enter any amounts of federal income tax withheld from payment in Box 4. (You’ll use this if you’re sending a 1099-MISC to an individual who refused to provide a W-9 or TIN. In this case, the federal government may require you to withhold 24% of the money you paid and send it the IRS.)

Section 409A Deferrals and Income - Boxes 15a and 15b require you to record Section 409A deferrals and income, which pertains to non-qualified deferral compensation plans.

State and Local Information - Enter the amount of state tax withheld (Box 16), the state/payer's state number (Box 17) and state income (Box 18). If you need to enter information for more than two states, you should complete another 1099-MISC for the information.

Basic 1099-MISC Filing Instructions

Breaking Down the Multi-Part 1099-MISC

The 1099-MISC is a multi-part form that is handled as follows:

Copy A — File with IRS by the paper or electronic-filing deadline.

Copy 1/State Copy — File with the appropriate state taxing authority, if applicable.

Copy B — Distribute this copy to individuals, who then file it with their federal income tax return. It must be delivered by January 31. You will meet the IRS’ distribution requirement if the form is properly addressed and mailed on or before this due date.

Copy 2 — Distribute this copy to individuals, if applicable. Individuals will then file this copy with their state taxing authority. Again, it generally must be delivered by January 31.

Copy C — Retain this copy for your records.

Make the Switch to 1099 Electronic Filing

Make the Switch to 1099 Electronic Filing

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