Who Must Receive Form 1099-MISC?

Form 1099-MISC Is No Longer for Payments to Non-Employees

Tax 1099 Misc form
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Form 1099-MISC is a general-purpose IRS form for reporting payments to others during the year, not including payments to employees. This form has been redesigned for 2020 to remove the reporting of non-employee income (from independent contractors, for example). Effective as of the 2020 tax year, you must report payments to non-employees on Form 1099-NEC (non-employee compensation).

So what payments get reported on 1099-MISC now?

Who Must Send a 1099-MISC Form? 

If you are in a trade or business, you must prepare 1099-MISC forms to show the amounts 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 Must Receive a 1099-MISC Form? 

To prepare these forms, you must first have each payee complete and sign a W-9 form with their taxpayer ID information. If the taxpayer ID is missing or incorrect, the IRS will reject the form. 

When you have prepared the forms, you must give them to payees and file them with the IRS. 

For Amounts of $600 or More

You must send and file a 1099-MISC for certain types of payments if you paid $600 or more during the year. Below that threshold you do not need to report the payment. 

Rents 

Rents (Box 1) include:

  • Payments to rent or lease office space, but not payments to real estate agents or property managers
  • Machine rentals. If the machine rental includes a payment to the operator of the machine, divide the payment between the machine and the operator and report the operator’s income on Form 1099-NEC.
  • Payments to owners of coin-operated amusements
  • Pasture rentals

Prizes and Awards

Prizes and awards (Box 3) include monetary prizes and the fair market value of merchandise you awarded to someone (for sweepstakes winnings, for example), but not if it involved a wager. 

Medical and Health Care Payments

You must report payments your business made to doctors, suppliers, or providers of medical or health care services (Box 6). This includes payments to medical health care insurance companies. You don’t have to report payments to pharmacies for prescription drugs. 

You don’t usually have to report payments to corporations, but you must report payments to corporations if they are providers of medical or health care services. Be sure to list the corporation as the payee, not an individual. 

Payments to Attorneys 

Use Form 1099-MISC to report gross proceeds of $600 or more during the year, including payments to corporations (Box 10). Gross proceeds aren’t fees for an attorney’s legal services; they are amounts paid in other ways, like in a lawsuit settlement agreement, for example. Use Form 1099-NEC to report payment of attorney fees for services. 

Miscellaneous Income

Use Box 3 to report other payments of $600 or more. Some examples of miscellaneous payments are termination payments to former self-employed insurance salespeople and payments of damages from a lawsuit (including punitive damages). 

Exceptions to the $600-a-Year Minimum

In a few rare cases, the $600 annual minimum does not apply:

Royalties

You must report royalties if you pay the recipient at least $10 during the year (Box 2). Royalties are payments to owners of property for use of that property. Examples are intellectual property (copyrights, patents, trade names, and trademarks) or oil, gas, or other mineral properties. 

Backup Withholding

Backup withholding orders (Box 4) are orders you receive from a court requiring your company to withhold income taxes from payments you make to a payee. You must report ALL backup withholding amounts for anyone for whom you have withheld income taxes under a backup withholding order, even if the total is $600 or less. If the backup withholding is for a non-employee, use Form 1099-NEC to report these payments. 

Direct Sales

Use Form 1099-MISC to report direct sales of at least $5,000 of consumer products to a buyer for retail, except for permanent retail establishments. 

Who Should Not Receive a 1099-MISC

Don’t use Form 1099-MISC to report payments to employees. Use Form W-2 for all payments to employees, including business travel allowances and expense reimbursements. Use form 1099-NEC to report payments to independent contractors.  

In general, you don’t have to report payments made to corporations, including LLCs taxed as corporations, but there are some exceptions (described above). 

You don’t need to report payments for merchandise, telegraphs, telephone, freight, storage, and other similar items.          

When and Where Do I File 1099-MISC Forms? 

Due Date

February 28 of the year after the tax year is the due date for 1099-MISC forms, for both payees and the IRS, however the due date changes each year for holidays and weekends. For example, because February 28 falls on a Sunday in 2021, the due date for 2020 forms is March 1, 2021. If you file these forms electronically with the IRS, you have until March 31 to file, but the March 1 deadline remains the same for payees.

See this business tax due date article for specific dates for the current tax year. 

How to File

The best way to file 1099-MISC forms with the IRS is to file electronically using the IRS File Electronic Returns Electronically (FIRE) system. If you file 250 or more 1099-MISC forms, you must file electronically. You can also file a printed 1099-MISC. 

For More Information

For an overview of Form 1099-MISC, including a comparison of Forms 1099-MISC and 1099-NEC and detailed filing instructions, see this article on what Form 1099-MISC is

For more detailed information on who must receive Form 1099-MISC, see this IRS publication on Forms 1099-MISC and 1099-NEC

The IRS regulations for Form 1099-MISC are complex, and every business situation is unique. The information in this article is intended to be a general overview, and not to be used as detailed instructions for completing this form. Get help from a tax professional or use tax preparation software to prepare this form.

Beginning in 2020, send Form 1099-MISC to a variety of payees. 

Beginning in 2020, send Form 1099-NEC to non-employees.

File 1099-MISC and 1099-NEC forms with the IRS. 

Article Sources

  1. IRS. "2020 Instructions for Forms 1099-MISC and 1099-NEC." Page 2. Accessed June 30, 2020.

  2. IRS. "2020 Instructions for Forms 1099-MISC and 1099-NEC." Page 4-5. Accessed June 30, 2020.

  3. IRS. "2020 Instructions for Forms 1099-MISC and 1099-NEC." Page 5. Accessed June 30, 2020.

  4. IRS. "2020 Instructions for Forms 1099-MISC and 1099-NEC." Page 6. Accessed June 30, 2020.

  5. IRS. "2020 Instructions for Forms 1099-MISC and 1099-NEC." Page 7. Accessed June 30, 2020.

  6. IRS. "About Form 1099-MISC, Miscellaneous Income." Accessed June 30, 2020.

  7. IRS. "General Instructions for Certain Information Returns." Page 6. Accessed June 30, 2020.

  8. IRS. "General Instructions for Certain Information Returns." Page 8. Accessed June 30, 2020.