Form 1099-MISC is a variant of Form 1099 used to report miscellaneous income.
The changes in Form 1099-MISC due to the Form 1099-NEC
IRS revised the Form 1099-MIsc due to the creation of Form 1099-NEC and rearranged box numbers for reporting certain income. Changes in the reporting of income and the 1099-MISC form's box numbers are listed below.
Payer made direct sales of $5,000 or more (checkbox) in box 7
Crop insurance proceeds are reported in box 9
Gross proceeds to an attorney are reported in box 10
Section 409A deferrals are reported in box 12
Non-qualified deferred compensation income is reported in box 14
Boxes 15, 16, and 17 report state taxes withheld, state identification number, and amount of income earned in the state, respectively
Use Form 1099 Misc to report payments by a business to independent contractors only when the total amount paid during the tax year is at least $600, though the form may still be issued at lower amounts. Since Form 1099-MISC only concerns payments made to an individual as an independent contractor, if an individual becomes an employee later, the $600 threshold need to be met only for part of work done as an independent contractor.
Other uses of 1099-MISC Form include rental income, royalties, and Indian gaming profits. When payments are made through third-part networks then filing Form 1099-MISC is not required and the Form 1099-K should be filed instead by the payment service. Nevertheless Form 1099-MISC may still be issued.
File 1099-MISC forms if you have paid a nonemployee $600 or more during the year. But, there are other requirements depending on the type of payments and the relationship between the payor and payee. File this form for each person to whom you have paid during the year:
at least $10 in royalties, broker payments or tax exempt interest (corresponds with 1099-MISC box 2). A Simple example of royalty payment is a payment made to an author for the rights.
at least $600 in:
Rents: (Box 1 on 1099-MISC) Report rental payments if your business rents property, such as equipment, cars or real estate.
Prizes and awards: (Box 3 and Box 7) This applies to prizes and winnners of contest awarded by your business since the wineers have to pay taxes on prizes.
Other income payments: (Box 3) payments for punitive damages.
Medical and health care payments: (Box 6) payments made by your business to doctors or suppliers/providers of medical services.
Cash payments : The cash paid from a notional principal contract to an individual, partnership, or estate. Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
Crop insurance : payments made for crop insurance proceeds.
Payments to an attorney : (box 14) Payments made to an attorney for a legal settlement are typically reported in Box 14.
Some payments, although they may be taxable to the recipient, do not have to be reported on 1099-MISC Form. Payments for which a Form 1099-MISC is not required include all of the following:
Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation).
Payments for freight, merchandise, telegrams, telephone, storage, and similar items.
Payments of rent to property managers or real estate agents. However, the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner.
Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2).
Wages paid to employees.
Business travel allowances paid to employees (may be reportable on Form W-2).
Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Retirement Plans, Insurance Contracts, etc.).
Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.
Payments made to or for homeowners from the HFA Hardest Hit Fund or similar state program (report on Form 1098-MA).
Compensation for injuries or sickness by the Department of Justice as a public safety officer disability or survivor's benefit, or under a state program that provides benefits for surviving dependents of a public safety officer who has died as the direct and proximate result of a personal injury sustained in the line of duty.
Compensation for wrongful incarceration for any criminal offense for which there was a conviction under federal or state law.
A copy of the 1099-MISC form is due to independent contractors by January 31 for the previous calendar year. January 31 is the deadline for filing the 1099-MISC with the IRS, if data is entered in Box 7 (non-employee compensation).
If your company needs more time to file your 1099-series forms, then you need to apply for an extension using Form 8809. There are two types of extensions:
Extension for filing 1099 forms with the IRS
Extension for delivering 1099 forms to recipients
Use this form to correct payment and withholding amounts on a 1099-MISC form you previously filed with the IRS.
If the payer does not file Form 1099-MISC, there is a maximum penalty of $250 per form not filed, up to $500,000 per year. Otherwise for late filings the penalty varies from $30 to $100, depending on how late the filing was.
There is a penalty to the payee for not paying income tax for the income referenced by Form 1099-MISC. The penalty is up to 20% of the underpayment.
