What You Need to Know Before You Prepare Form 1099-MISC
Form 1099-MISC is titled "Miscellaneous Income." This form is used for a variety of payments, but not for non-employees. A 1099-MISC form must be given to anyone to whom $600 or more has been paid during the year.
Payees need this information to report income on their personal or business federal and state income tax returns. The form is also filed with the IRS for verification purposes.
The information provided on Form 1099-MISC includes the amount of payments made, and federal and state income taxes withheld (only in specific cases).
Must I Submit Form 1099-MISC for a Small Amount of Payment?
You must provide Form 1099-MISC to individuals and businesses who you paid $600 or more during the past year, $10 or more of royalties paid, and direct sales of $5,000 or more of consumer goods for resale.
To Whom Must I Give Form 1099-MISC?
Form 1099-MISC must be provided to individuals and businesses to whom you paid $600 or more during the calendar year, but this doesn't payments to contract workers, freelancers, and gig workers. The question of who must receive a 1099-MISC is complicated. Here are some examples of payments you must report on Form 1099-MISC:
- Payments for rental property expenses
- Payments to a physician, physicians' corporation, or other suppliers of health and medical services issued mainly by medical assistance programs or health and accident insurance plans
- Payments for services performed for a trade or business by people not treated as its employees. Examples: fees to subcontractors or directors and golden parachute payments
- Fish purchases paid in cash for resale
- Crop insurance proceeds
- Gross proceeds paid to attorneys (box 14). (Due to IRS February 15)
- Excess golden parachute payments
In addition, payments to certain types of corporations must be reported including medical and health care payments (box 6) and attorney fees (box 7).
When is Form 1099-MISC Due? Who Do I Send It To?
Form 1099-MISC must be provided to payees no later than January 31 each year. You can send the form by mail or provide it online. You must file all 1099-MISC forms with the IRS no later than February 28 (March 31, if filing electronically).
For the 2020 tax year, the deadline for giving 1099-MISC forms to payees is February 1, 2020, and the deadline for filing with the IRS is March 1, 2021, if you are doing a paper filing, and March 31, 2021, if you file electronically.
It's a good idea to give the 1099-MISC forms to the payees early in January. This will give them time to review the form and for corrections to be made.
Along with Copy A of all the 1099-MISC forms, you provided to non-employees, you must submit Form 1096 transmittal form to the IRS, which totals all information from all 1099 forms.
You do not have to submit the 1096 form if you e-file the 1099 forms.
How Do I Get Copies of 1099 Forms?
You can obtain 1099-MISC forms at your local office supply store, from a payroll service, from an online payroll software program, a business tax program, or directly from the IRS. You cannot use 1099-MISC copies downloaded from the Internet because Copy A of the 1099-MISC form is in a specific color of red ink and cannot be duplicated. Here is a link to the IRS Form 1099-MISC.
This form cannot be submitted to the IRS because it cannot be downloaded and printed. For more information, here is a link to the Instructions for Form 1099-MISC.
What Information Do I Need for a 1099-MISC?
Before you begin working on the 1099-MISC form, you will need
- The total amount of payments for this person or business during the year and
- The person's taxpayer ID number, and address.
If you withheld amounts from these payments for backup withholding, you will also need to report the total backup payment amount for the year on the 1099-MISC form.
Can I Submit Form 1099-MISC Online?
You can submit Form 1099-MISC for all payees online. If you file 1099-MISC forms online, you do not need to include a copy of the 1096 transmittal form. File online with the IRS by using their Filing Information Returns Electronically (FIRE) system. You will need to register with the FIRE system before you begin filing using this system.
What If I Submit Form 1099-MISC Late?
You may be subject to late filing penalties if you submit 1099-MISC and 1096 forms after the due dates. The amount of the penalty is determined in part by how late you file and the size of your business.
Using a payroll service provider or accountant to prepare these forms does not relieve you of the responsibility to ensure that the 1099 forms are filed correctly and on time. If your failure to file is intentional, the penalty is at least $100 for each type of form and with no maximum.
What If I Make a Mistake in Form 1099-MISC?
If you make a mistake in completing a 1099-MISC form, and the error is discovered before you submit the form to the IRS at the end of February, just correct the mistake. That is why there is a one-month time between providing forms to contract workers and submitting them to the IRS.
If you discover an error after you have submitted the 1099-MIS form to the IRS, you must submit a corrected 1099-MISC form. To correct a 1099-MISC form, check the "corrected" box at the top, and do not forget to change Form 1096 if the correction affects totals on this form.