A 1099-MISC tax form is used for reporting taxable payments from your business to a variety of payees. You must report payments you make to miscellaneous types of payees during the year, and you must give these reports to the payee and send them to the IRS.
What Is a 1099-MISC Form?
A 1099-MISC is a form used by businesses to report miscellaneous taxable payments to many different kinds of payees.
Beginning with reports for the 2020 tax year, you can’t use the 1099-MISC form for payments you make to non-employees (independent contractors, attorneys, and others who provide services to your business). You must file the new Form 1099-NEC (for non-employee compensation) to report these payments.
Who Uses Form 1099-MISC?
If you are in a trade or business, you must use 1099-MISC forms to report the amount you have paid to others during the year. The IRS considers “trade or business” to include:
- Operating for gain or profit
- A non-profit organization, including 501(c)3 and (d) organizations
- A trust of a qualified employer pension or profit-sharing plan
- A non-exempt farmers’ cooperative
- A widely held fixed investment trust
Who Receives a 1099-MISC Form?
Use Form 1099-MISC to report payments of $600 or more to a specific payee for the year (exceptions below). This is a list of the most common types of payees, including which box on the form to use.
- Rents (Box 1): Payments to rent or lease space, to the owners of that space (not real estate agents or property managers), and payments for machine rentals
- Prizes and awards (Boxes 3 and 7): The fair market value of merchandise awards, but not from wagers
- Medical and health care payments (Box 6): Payments to healthcare providers and medical or health care service providers
- Attorneys (Box 10): Payments to attorneys for gross proceeds (from a lawsuit settlement, for example), but not for attorney legal fees (reported on Form 1099-NEC)
Exceptions to the Minimum $600 a Year Regulation
- Royalties (Box 2): Payments of at least $10 during the year to owners of a property (including intellectual property) for use of that property
- Backup withholding (Box 4): All withholding from anyone from whom you withheld money as a result of a backup court order, even if it’s less than $600. Report backup withholding from non-employees on Form 1099-NEC.
- Direct sales (Box 9): Sales of at least $5,000 of consumer products for resale anywhere other than a permanent retail establishment. Enter an “X” in the checkbox; don’t enter a dollar amount.
- All excess golden parachute payments (Box 13): Amounts over average annual compensation for services included in the individual's gross income over the past five years
Don’t use Form 1099-MISC to report payments to:
- Employees; use Form W-2 for all types of payments to employees.
- Non-employees (with some exceptions)
- Corporations (with some exceptions)
- Pay for merchandise, telegraphs, telephone, freight, storage, and other similar items
See the IRS Instructions for Form 1099-MISC and Form 1099-NEC for a complete, with definitions and details on what to include and not to include.
How Do I Fill Out Form 1099-MISC?
The 1099-MISC is a multi-part form with these parts:
- Copy A (in red) for the IRS
- Copy 1 for the state tax department
- Copy B for the recipient
The information on a 1099-MISC form is in two parts:
- Information about the payer and the payee, including taxpayer ID numbers for both
- Boxes for reporting different types of payments
The form also includes a checkbox for the Foreign Account Tax Compliance Act (FATCA) filing requirement. This box applies to the FATCA reporting on foreign assets that may be subject to withholding. If you aren’t sure about FATCA reporting, check with your tax professional.
Enter the amounts you paid to that payee in the correct box (see above), based on the type of payments you made, in Boxes 1-14.
Box 4 is for any federal income tax you withheld from that payee, usually only for backup withholding.
Boxes 15, 16, and 17 are for state income tax purposes.
Be sure to enter payments in the correct box, because the IRS checks to see that both payer and payee entries are in the same box.
Form 1099-MISC vs. Form 1099-NEC
Beginning with the 2020 tax year, you must use two different forms to report different types of payments. The two forms are similar, but due dates are different.
|Form 1099-MISC||Form 1099-NEC|
|Report payments for rents, royalties, prizes, medical/healthcare payments, backup withholding, and other||Report payments to non-employees, including independent contractors, small businesses, attorneys, and individuals|
|Due date: February 28 of the year after the tax year||Due date: January 31 of the year after the tax year|
|Don’t report for employees (for all types of payments) or for non-employees||Don’t report for employees (for all types of payments)|
How Do I Get Form 1099-MISC?
You can get the multi-part form in several ways. You can:
- Order the forms from the IRS
- Use business tax preparation software versions that include this form
- Have your tax professional prepare these forms from your information
You can’t use a print Copy A of Form 1099-MISC on a copier. This form is in a specific color of machine-readable red ink. You must buy the forms or send them electronically.
How Do I File Form 1099-MISC?
You can file your 1099-MISC forms with the IRS through the Filing Information Returns Electronically (FIRE) system. You must file electronically if you are filing 250 or more 1099-MISC forms in a year.
You may submit your 1099-MISC forms to the IRS by mail if you are filing fewer than 250 forms. If you are filing a paper form, you must include Form 1096 summarizing all the 1099-MISC forms you’ve prepared.
See the IRS General Instructions for Certain Information Returns for the mailing address, depending on your business location.
Due Dates for Form 1099-MISC
All 1099-MISC forms must be submitted to the payee by February 28 of the following year, so they can use the form to prepare their income taxes.
You must file Form 1099-MISC with the IRS by February 28 of the following year, if you file on paper, or by March 31 if you file electronically.
The date for filing these tax reports varies each year because of weekends and holidays. See this article for the current year’s tax due dates.
What Are the Penalties for Not Filing This Form?
If you don’t file Form 1099-MISC with the IRS by the due date, you can be penalized. You may also get a penalty if you filed on paper when you were required to file electronically, if you failed to report a taxpayer ID or it was incorrect, or if you use a paper form that’s not machine-readable.
The penalty is applied for each form and it’s based on when you file and if the information is correct. Small businesses (under $5 million in gross receipts) may have lower penalties if they can show reasonable cause for the delay.