1099-MISC Form for Reporting Non-Employee Income

Payment Information for Non-employees and Independent Contractors

What kind of payments require a 1099-MISC Form? Medical and health care payments, excess golden parachute payments, fees, commissions, rents, or royalties paid, income earned by an independent contractor, payments for prizes, awards, or legal services.

Image by Evan Polenghi © The Balance 2019

The deadline for filing 1099-MISC forms and 1096 transmittal forms is January 31 of the following year. This is the same as the deadline for giving 1099-MISC forms to recipients.

There are no extensions allowed for this deadline. You can find details in this article about the annual payroll tax report deadlines. 

What is a 1099-MISC Form?

A 1099-MISC form is used to report miscellaneous income (sometimes called "non-employee income") to the IRS. It is also used to give information on income to the recipients, so they can complete their income tax returns. The 1099-MISC form is an annual wage report form, meaning that it reports the annual income of the recipient.

The 1099-MISC form shows the amount you paid to the recipient during the calendar year, in a box depending on the type of payment. If income tax withholding has been taken from the payments (this is not usual), the total amount of the withholding for the year is included. The tax ID and other information about the recipient also must be included. 

What Types of Payments Does a 1099-MISC Report?

Most businesses use 1099-MISC forms to report payments to non-employees. The IRS uses the term "non-employee" to include anyone who provides services to another individual or business. It's a broad category, including freelancers, private contractors (like maintenance services), and outsourcing companies. 

In addition to payments to non-employees, the 1099-MISC form is used to report other common types of payments, including:

  • Rents (box1)
  • Services performed by non-employees (box 7)
  • Prizes and awards (boxes 3 and 7)
  • Other income payments (box 3)
  • Medical and health care payments (box 6)
  • Payments to an attorney (with some exceptions).
  • In addition, you must use this form to report direct sales of at least $5,000 of consumer products for resale anywhere other than a permanent retail establishment (box 9) 

Who Must Receive a 1099-MISC Form?

If you paid $600 or more to a non-employee or any of the other categories above, or $10 or more in royalties during the year, you must send that person a 1099-MISC showing the total amount you paid for that year.

If you withheld any federal income tax under a backup withholding order, you must report all of that income, even if it's less than $600.

If you made payments to a corporation, you probably don't have to give them a 1099-MISC form.

There are exceptions to the requirement to send a 1099-MISC to a non-employee, including those for attorneys. See this article about who must receive a 1099-MISC form, for more details.

 Before a potential recipient can receive a 1099-MISC, they must complete a W-9 form. This form is similar to a W-4 form that new employees must complete at hire. The W-9 form includes name and address and, most importantly, the recipient's tax identification number. 

How is a 1099-MISC Different from a W-2 Form? 

W-2 forms are the year-end wage and tax reports given to employees. A W-2 form shows the gross taxable earnings of the employees, as well as federal/state withholding and FICA taxes (Social Security and Medicare). 1099-MISC forms are given to non-employees, showing amounts of payments during the year. In most cases, no taxes are withheld, and there's no FICA tax withholding. 

If you aren't sure whether you should give someone a W-2 or a 1099-MISC, check this IRS article on employees vs independent contractors.

What are the Deadlines for 1099-MISC Forms? 

Submitting to Recipients: All 1099-MISC forms must be submitted to the payee by January 31 of the following year, so they can use the form to prepare their income taxes.

Filing with the IRS: If you are reporting non-employyee compensation in box 7, you must file the 1099-MISC with the IRS by January 31 of the following year. For all other reported payments, you must file Form 1099-MISC with the IRS by February 28, if you file on paper, or March 31, if you file electronically.

The exact date changes each year, based on when the deadline falls. If the deadline is a holiday or weekend, the deadline is the next business day. For more details about the exact deadlines for submitting 1099-MISC forms in the current year to workers and to the IRS, see this article with deadlines for the most recent tax year. 

Where Can I Get 1099-MISC Forms?

If you have a payroll service, online business tax software, or accounting software, you may be able to use those to complete the form and file it with the IRS. You can also order forms directly from the IRS by mail.

If you have only a few forms to file, you can use the PDF fillable format online. But this form is fillable only for the state copy, and Copy 1 for the recipient. You can't print out copy A and send it because it's printed in a special red ink. You can get copies of the original at an office supply store.

Pay attention to the date on the 1099-MISC form. You must use the form dated for the tax year you are reporting, not the year when you must submit the form. For example, if you are reporting 2019 income, use the 2019 version of 1099-MiSC.

What Does a 1099-MISC Form Look Like? 

The 1099-MISC is a multi-part form.

  • Copy A is submitted to the IRS by the payer (your business)
  • Copy 1 is submitted to the state tax department by the payer
  • Copy B is for the recipient
  • Copy 2 is given to the recipient for filing with the state tax return.
  • Copy C is kept by the payer.

Before you Prepare Form 1099-MISC

You will need two things before you begin:

  •  A W-9 form signed by the non-employee, in order to gather information on the person's contact information and also, more important, a taxpayer ID number for that person. If you don't have a taxpayer ID or the ID is wrong, you may have to begin withholding taxes (called backup withholding) from the person's 1099 earnings.
  • The total payments for that person or business for the year. Remember, unless you are reporting backup withholding, if you haven't paid $600 to that person during the year, you don't need to complete a 1099-MISC form (but the person must still report all the income received). 

How Do I Prepare Form 1099-MISC? 

This article takes you step-by-step through the process of completing Form 1099-MISC. You will first need to collect information about each payee. If you don't have a W-9 form signed by the recipient, you will need to get one. 

Other Income vs Nonemployee Income

One confusing part of completing Form 1099-MISC is between boxes 3 and 7

Box 7, for non-employee compensation, is for payments to independent contractors and other non-employees who have done work for you. Include fees, commissions, prizes, and awards to those people or businesses. The IRS lists four conditions that must be met for someone to be classified as a nonemployee:

  • The person is not an employee
  • The payment was for services in the course of your trade or business
  • the payment is to an individual, partnership, estate, or, in some cases, to a corporation,
  • The payment was for at least $600 during the year..

Box 3, Other income is for payments not reportable in one of the other boxes, including prizes and awards that are not for services performed. 

How to File 1099-MISC Forms with the IRS 

You can file Form 1099-MISC with the IRS as paper copies or online. If you are submitting paper copies of all 1099-MISC forms, you can submit along with a Form 1096 transmittal form. Be sure you get the correct forms for paper filing. 

It's easier to submit 1099-MISC forms electronically. In this case, you don't need the 1096 transmittal forms. The 1099-MiSC is an information return, and the IRS requires that these returns be filed electronically using the FIRE System (FIlinig Information Returns Electronically).

If you have more than 250 information returns for a year, you MUST file electronically. 

This information is intended to be general and not tax advice or detailed instructions for completing this form. Filing incorrect information or filing late can lead to penalties. Get help from a payroll expert or your tax professional to complete and file this form.

Article Sources

  1. IRS. "Instructions for Form 1099-MISC." Specific Instructions, Page 1. Accessed Nov. 15, 2019.

  2. IRS. "Form 1099-MISC Miscellaneous Income." Accessed Nov. 15, 2019.

  3. IRS. "Form W-9 Request for Taxpayer Identification Number and Certification." Purpose of Form, Page 1. Accessed Nov. 15, 2019.

  4. IRS. "Instructions for Form 1099-MISC." Reminders, Page 1. Accessed Nov. 15, 2019.

  5. IRS. "Instructions for Form 1099-MISC." Box 7. Nonemployee Compensation, Page 7. Accessed Nov. 15, 2019.

  6. IRS. "Instructions for Form 1099-MISC." Box 3. Other Income, Page 5. Accessed Nov. 15, 2019.

  7. IRS. "Filing Information Returns Electronically (FIRE)." Accessed Nov. 15, 2019.