Who Must Receive Form 1099-MISC?
Form 1099-MISC is given to non-employees such as independent contractors and other entities paid by your company. You must give a 1099-MISC form to any individual or business your business paid $600 or more in a tax year.
Be sure to use the 2019 version of 1099-MISC for 2019 payments to nonemployees and others. The 1099-MISC form is changing in 2020, and a new 2020 Form 1099-NEC will be used to report nonemployee compensation.
To be sure you are using the correct form, check that the date "2019" is in the top right, and that Item 7 is for "nonemployee compensation."
To Whom Must I Give a 1099-Misc?
In addition to non-employees who do work for your company, such as cleaning services, IT support, and maintenance services), 1099-MISC forms must be given for payments of $600 or more for services. The list below explains the items that should be included and where on the form to include them.
- Payments of royalties of $10 or more during the year (see box 1)
- Rents (see box 1).
- Services performed by someone who is not your employee (including parts and materials) (see box 7).
- Prizes and awards (see boxes 3 and 7), but not to employees.
- Other income payments (see box 3).
- Medical and health care payments (see box 6).
- Crop insurance proceeds (see box 10).
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish (see box 7).
- Cash paid from a notional principal contract to an individual, partnership, or estate (see box 3).
- Payments to an attorney (but see below for exceptions).
- Any fishing boat proceeds (see box 5)
Some additional circumstances where you must send and file a 1099-MISC form:
- To report direct sales of at least $5,000 for resale anywhere other than a permanent retail establishment.
- For anyone for whom you have withheld any federal income tax under a backup withholding order.
- Payments to nonprofit organizations, trusts of qualified pension or profit-sharing plans of employers, certain other exempt organizations, and farmers' cooperatives, widely held fixed investment trust, and payments to federal, state, or local governments.
You only need to report payments you made in the course of your business. Personal payments are not reportable.
What is Nonemployee Compensation?
A non-employee is anyone who does work for your business but not as an employee. The IRS sets four conditions under which you must report a payment as nonemployee compensation (all four must be met):
- The payment is to someone who is not an employee
- The payment was made for services in the course of the payer's business or trade (including government agencies and nonprofit organizations)
- The payment was made to an individual, partnership, estate, or, in some cases, a corporation.
- Payments to the payee were at least $600 during the year.
Exceptions to the 1099-MISC Requirement
Here are some general exceptions to the requirement that you must issue a 1099-MISC:
- Corporations, including LLCs, treated as an S corporation or C corporation, but the exemption from reporting payments made to corporations does not apply to payments for legal services.
- Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
- Payments of rent to rental agents.
- Payments of wages/salaries to employees and payments for business travel to employees.
- Cost of current life insurance protection (report on Form W-2 or form 1099-R)..
Payments to Corporations
Although payments to corporations are generally exempt from the 1099-MISC reporting requirements, some payments to corporations must be reported:
- Medical and health care payments (box 6)
- Fish purchases for cash (box 7)
- Attorneys' fees (box 7)
- Gross proceeds payable to an attorney (box 14)
- Substitute payments in lieu of dividends or tax-exempt interest (box 8)
What About 1099-Misc Forms for Attorneys?
The 1099-MISC instructions are specific about providing 1099-MISC forms for attorneys law firms, but they distinguish between two different types of payments:
- Fees: Any law firm or attorney to whom you paid $600 or more in fees during 2018 must be given a 1099-MISC form. Enter the total paid in Box 7. It does not matter if this attorney is a corporation; the 1099-MISC must be provided.
- Gross proceeds: If you paid an attorney $600 or more in "gross proceeds," you must also provide a 1099-MISC (Box 14). Gross proceeds are an amount an attorney receives as part of work on a settlement or sale (of a business or business assets, for example) or in the case where an attorney accepts funds on behalf of a client and takes a fee from the payment.
See the Instructions for Form 1099-MISC for more details on who should receive and not receive this form.
Before You Send out a 1099-Misc Form
Before you give anyone a 1099-MISC form, you must first get a W-9 form from that person, verifying the taxpayer ID number. You cannot accept the person's information informally. If your business is audited, you will need to be able to show a W-9 form for everyone who did work for you. The W-9 form must contain a valid tax identification number.
Preparing 1099-MISC Forms
The IRS provides instructions for Form 1099-MISC along with a comprehensive list of who should and should not receive a form.
Copy B of this form should be submitted to the recipient by January 31, 2019. The due date is extended to February 15, 2019, if you are reporting payments in box 8 or 14. Copy A of this form must be filed with the IRS by January 31, 2019, if you are reporting payments in box 7. Otherwise, Copy A must be filed by February 28, 2019, if you file on paper, or by April 1, 2019, if you file electronically.
States may have an equivalent filing requirement or form, so employers should check state tax law for compliance. Check with your tax professional if you have concerns with sending someone a Form 1099-MISC.
The information in this article is a general overview. The IRS regulations for Form 1099-MISC are complicated and every business situation is different. Talk to your tax professional before you make decisions about who should or should not receive a 1099-MISC.
IRS. About Form 1099-MISC. Accessed Oct. 7, 2019.
IRS. Instructions for Form 1099-MISC. Page 1. Accessed Oct. 7, 2019.
IRS. "2019 Instructions for Form 1099-MISC." Box 7. Nonemployee Compensation. Page 13. Accessed Dec. 23, 2019.
IRS. Instructions for Form 1099-MISC. "Reportable payments to corporations," Page 2. Accessed Oct. 7, 2019.
IRS. Instructions for Form 1099-MISC. "Payments to Attorneys, Page 2." Accessed Oct. 7, 2019.