Knowing how to fill in and file Form 1099-MISC is essential for many taxpayers and businesses. However, those new to this particular form may not know exactly how it works, which boxes to fill in, and the deadline for filing. This guide will provide all the 1099-MISC instructions you need to know.
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What Is the 1099-MISC?
Before digging into the details, it’s important to have a basic understanding of what the 1099 MISC form is and why it’s used. Simply put, Form 1099-MISC (Miscellaneous Information) is an Internal Revenue Service (IRS) form that is used for reporting various forms of miscellaneous compensation.
The 1099-MISC is part of the wider family of 1099 forms – there are approximately 20 variants of these forms in total. Each one is different. In the case of 1099-MISC, it’s used for reporting the likes of rent, prizes, awards, legal payments to an attorney, and healthcare payments.
It’s worth noting that 1099-MISC was also previously used for reporting nonemployee compensation for contractors and freelancers. However, since 2020, Form 1099-NEC has been used for that purpose instead (more about that below).
Purpose of Filing Form 1099-MISC
As explained above, the main purpose of Form 1099-MISC is for reporting miscellaneous payments. That term may seem vague, so here’s a full breakdown of everything it covers:
At least $10 in royalties or broker payments.
At least $600 in:
- Rents
- Prizes and awards
- Other income payments
- Medical and health care payments (made during the course of your business operations)
- Crop insurance proceeds
- Payments made for fish or other marine life, bought from those in the business of catching fish
- Money paid from a notional principal contract to either an individual, partnership, or estate
- Money paid to an attorney (during the course of your business)
- Fishing boat proceeds
Sales of at least $5,000 of consumer products to someone with the intent of reselling those products outside of a permanent retail establishment.
For example, a property manager will need to fill in a 1099-MISC to report rent to the property owner. Alternatively, if an organization has issued a cash prize to a third-party, they can use the Form 1099-MISC to report that.
Detailed Instructions for Each Box on Form 1099-MISC
There are multiple boxes on the Form 1099-MISC. You won’t need to fill them all in, but it’s important to know which ones to fill and how to enter the required information in each one. Below, we’ll provide detailed 1099-MISC instructions for each of the key boxes on the form.
Box 1: Rents
Box 1 is the rents box. This is used to report all rents totaling $600 or more, including:
- Working Spaces: Rental payments made for offices or working spaces. Note that you don’t need to use the Form 1099-MISC if you yourself have paid the rent to an estate agent or property manager. Instead, it is up to the agents and property managers to use 1099-MISC to report the rent that has been paid to the owner of the property.
- Machines: Machine rentals should also be reported in this box. For instance, renting a piece of machinery to do some work on a commercial building or plot of land. Sometimes, machine rentals will be just one part of a working contract, so you’ll need to calculate the exact cost of renting the machine and report that figure in Box 1 of the form.
- Pasture: Pasture or land rentals are also included, like a farmer who rents out a plot of land for their livestock.
- Other: Other niche forms of rent may also come under this category. For example, a business that technically leases coin-operated amusement machines from an owner may need to report those rental/lease payments on the form.
Work out the exact amount of rent paid and enter the full amount in Box 1 to complete this step.
Box 2: Royalties
Box 2 should be used for reporting gross royalty payments totaling $10 or more. This includes all royalties from the likes of oil and gas, as well as other mineral properties. Make sure to not include any surface royalties, and note that there’s no need to report any oil or gas payments made for working interest – that should be done on Form 1099-NEC instead.
You can also report royalties in this box that were made from intangible property, including the likes of copyrights and trademarks, as well as royalties paid out by a publisher to a writer (or their agent).
Box 3: Other Income
Box 3 can confuse those who aren’t familiar with the 1099-MISC form, as it has a vague title: “Other Income.” Here, you’ll need to enter any income of $600 or more that essentially doesn’t fit any of the other boxes on the form. This can include cash from prizes and awards, as well as other amounts of income from an array of sources.
To simplify the situation, here’s a full list of everything you may include in Box 3:
- Prizes: Prizes and awards paid out on game shows or in sweepstakes and other competitions.
- Merchandise: The fair market value (FMV) of merchandise won in contests, game shows, etc.
- Studies: Payments received as part of participation in medical studies or trials.
- Termination: Termination payments given to formerly self-employed insurance sales people.
- Deceased Wages: All accrued wages, vacation pay, and other compensation paid after an employee has died since their date of death.
- Damages: All punitive damages and damages related to nonphysical injuries and illness, as well as for emotional distress that isn’t related to any kind of physical injury or illness.
- Foreign Agriculture: All compensation paid to a H-2A vis agricultural worker (if they failed to provide a TIN [taxpayer identification number])
Box 4: Federal Income Tax Withheld
Box 4 applies in cases where you’re withholding federal income taxes from payments that have been made to nonemployees. It’s rare that you’ll actually need to do so, but there are some situations in which it is relevant. For example, if a payee hasn’t given you their TIN, they’re subject to having their federal income tax withheld.
Fortunately, the IRS will usually let you know if backup withholding is actually needed, so you don’t have to worry about figuring it all out on your own. In other words, if you get a notification from the IRS, then you can go ahead and fill in Box 4 as needed. If not, you can move on from this box.
Box 7: Payer Made Direct Sales Totaling $5,000 or More
Box 7 is another one that may be a little tricky, as it only applies in specific circumstances. To be exact, you’ll need to fill in this particular box if you made direct sales of over $5,000 to someone on a resale, buy-sell, deposit/commission basis, or any other basis.
Note that if you do meet the requirements for this box, you just need to mark it with an “X.” You don’t need to enter a specific dollar amount. You also don’t need to fill in any other official form detailing the sales to the recipient. Instead, you can write a letter containing all the relevant info.
Other 1099-MISC Boxes
Above, we’ve detailed 1099-MISC instructions for the most important and commonly-filled boxes of the form. But there are several more boxes you may need to fill, depending on your line of work and activities throughout the year.
Box 5
Box 5 is fishing boat proceeds. It’s only needed for people who operate fishing boats. If you fall into the category, you’ll need to enter the value of any proceeds from the sale of a catch, along with cash payments of up to $100 for each trip that are paid out for duties on board, like engineering or cooking.
Box 6
This box concerns medical and health care payments. Here, enter any payments of $600 or above that were made during the course of your business operations to doctors or healthcare providers. That includes payments for sickness insurance programs, along with charges for various medical services like injections, medication, etc.
Box 8
Box 8 is for substitute payments made instead of dividends or interest payments. You should enter any payments of $10 or more that were given instead of dividends or tax-exempt interest.
Box 9
No. 9 concerns crop insurance proceeds. Enter any value of $600 or more that was paid out to farmers or agriculture professionals by a crop insurance company.
Box 10
In this box, enter any values of $600 or more paid to an attorney in relation to legal services they have provided.
Box 11
This box only applies to those in the business of buying and selling fish or other marine/aquatic animals. You have to report all cash payments totaling $600 or more to anyone in the business of catching fish for resale.
Box 12
There’s no need to worry about Box 12. It refers to section 409A deferrals, but the IRS itself instructs users to ignore it.
Box 13
Box 13 is a little complicated and should only be marked with an “X” by specific people. Most users can simply skip it, but if you’re unsure, contact the IRS for advice.
Box 14
This box is for any excess golden parachute payments – this means any amount that surpasses the base amount for a golden parachute.
Box 15
This box is for nonqualified deferred payments, and, like Box 13 and some of the others, it only applies in specific situations. Most people won’t need to enter anything here, but you can contact the IRS for more info if needed.
How To File the 1099-MISC?
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You can find the 1099-MISC form directly on the IRS website. Note that Copy A of the form, which appears in red, isn’t to be printed or filled in – it’s for IRS use only. Instead, you can only print and fill the black sections, and you’ll need to print and send various copies.
Copy 1 should go to the recipient’s state tax department. Copy B goes to the recipient themselves. Copy 2 also goes to the recipient to be filed alongside their own tax return, while Copy C should be held onto by the payer for their records.
When filling in the form, you (the payer) will need to enter your name, address, and tax identification number, as well as details of the recipient, like their name, address, and Social Security number.
Recipient’s TIN and Account Number
You’ll need to enter the recipient’s TIN (taxpayer identification number) on Form 1099-MISC too. Normally, you should find this information on the payee’s W-9 form. If you don’t have that particular form, you’ll need to take action to acquire the TIN – if you try to file forms without the relevant TIN, you may receive a CP2100A notice back from the IRS.
First, contact the payee and request the information directly from them. After that, make sure to update your standard operating procedures and collect W-9 forms from payees in the future, so you don’t have to deal with this issue again. This should help you save time and avoid any confusion with future payees.
Note that if you happen to be working with the aid of an accountant or tax professional, they may be able to take care of this for you. Also note that in the case of business recipients, the EIN (employer identification number) may be needed in place of the TIN – recipients without an EIN may use an SS4 form.
State Information Boxes 16–18
Boxes 16 to 18 are reserved for state information. They should only be filled in by payers participating in the Combined Federal/State Filing Program, as well as those who are obliged to file paper copies of the 1099-MISC form to their local state tax department. Again, if you’re unsure whether or not this applies to you, it’s often best to contact the IRS and ask them.
Deadlines to Send and File 1099-MISC
But when are 1099s due? Well, the deadline for Form 1099-MISC is March 1 if you file manually (on paper) or March 31 if you choose to file electronically. Note that penalty fees do apply if you file the form late, so it’s definitely best to be aware of the deadlines and make sure you file on time to avoid any problems.
Electronic Filing Guidelines
These days, a lot of IRS forms can be filled in electronically, all from the comfort of your home, with no need for manual writing and mailing. This can be a preferred method for those who want to save time. Plus, if you file electronically, you benefit from the extended March 31 deadline.
How to File Form 1099-MISC Electronically
You can use the IRS’s FIRE (Filing Information Returns Electronically) system to submit your 1099-MISC digitally. To do so, make a new account on the FIRE site, or log in if you’ve already got one, and follow the on-screen guidance. It’s relatively simple and shouldn’t take too much time to complete.
E-Filing vs. Paper Filing
The main difference between e-filing and paper filing is simply a question of speed and convenience. A lot of people nowadays prefer to file documents online, as it’s faster and easier to fill everything in with a few quick clicks and submit the form electronically right away, rather than having to do it manually and wait for it to arrive via the mail.
In addition, e-filing has an extended submission date of March 31, as opposed to March 1 for paper filing. Generally, e-filing is the easier and safer choice. However, you’re still completely within your rights to fill in and mail the form by hand, if that’s what you prefer. Just make sure to send it with enough time to arrive before the deadline so you don’t face any penalty fees.
What’s the Difference Between Form 1099-MISC and 1099-NEC?
The main difference between forms 1099-MISC and 1099-NEC is their purpose. In the past, 1099-MISC was used for reporting nonemployee income and compensation, but from the year 2020 onward, 1099-NEC was introduced to take over that task. And 1099-MISC was adjusted to be used purely for reporting miscellaneous compensation. Note that forms 1099-MISC and 1099-NEC aren’t interchangeable and you may need to file both to the IRS, depending on your business activities.
Key Takeaways
The 2020 changes to Form 1099-MISC caused some initial confusion, especially for those who were used to filling in nonemployee compensation via this form. However, in the years since then, the changes and differences between 1099-MISC and 1099-NEC have been made clear, and it should be easy to understand which form you need to fill in and what information to include.
Hopefully, this 1099-MISC instructions guide will help you when completing the form in future. To make your 1099 form filing even easier, you may like to consider leading tax software from Bonsai, which can alert you to filing deadlines, record expenses, and much more. Start your free trial today.
Frequently Asked Questions
Here are some of the most commonly asked questions on the subject of 1099-MISC forms.
What Is the Minimum Amount That Must Be Reported on Form 1099-MISC?
Form 1099-MISC must be filed if at least $600 has been paid to a person in rents, prizes, other income payments, medical or healthcare payments, etc.
What Should I Do if I Receive an Incorrect 1099-MISC?
The best thing to do if you receive an incorrect 1099-MISC form is reach out to the issuer and let them know about the problem. They may have simply made a mistake that can then be amended on a new form. If the issuer disagrees or fails to address the problem, it’s best to contact the IRS directly to discuss the matter. They’ll be able to guide you on the next best steps to take.
Can I File Form 1099-MISC After the Deadline?
Yes, it is possible to file your 1099-MISC after the deadline, but you’ll risk having to pay some extra fees for filing late. Specifically, if you file within the first 30 days after the deadline, you’ll pay a $60 penalty fee. If you fail to file within the first 30 days, but still get your form in by August 1, you’ll have to pay $120. If the form is filed later than August 1, the penalties go up to $310.
