What is Form 1099-MISC? Form 1099-MISC, Miscellaneous Information, is an information return that businesses use to report miscellaneous taxable payments to many kinds of payees. It is a general-purpose IRS form used to report payments made during the year, including royalties, awards, rents, medical and health care payments, and payments made to attorneys.
Who Should Get a 1099-MISC Form? If you received certain types of payments of $600 or more during the year, chances are, you will receive a 1099-MISC Form. You will be asked to complete and sign a W-9 form, which will include your taxpayer information. The payor shall then prepare and send the 1099-MISC Form to you and the IRS.
Are You Responsible for Distributing It? If you make certain payments as a function of your trade or business, you must prepare 1099-MISC forms to show the amounts you have paid to others during the year. If you paid a person that is not an employee nor an independent contractor during the tax year, for rents, royalties, medical or health care, and other types of payments, you’ll need to send these individuals and the IRS a 1099-MISC. Remember not to use Form 1099-MISC to report payments to non-employees such as independent contractors. Payments for work performed by non-employees should be reported on Form 1099-NEC. You must also send Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to the IRS. Form 1096 is a summary form of IRS Forms 1099-MISC.
File Form 1099-MISC for each person you have given the following types of payments in the course of your trade or business during the tax year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
- At least $600 in the following:
- Prizes and awards
- Other income payments
- Cash from a notional principal contract to an individual, a partnership or an estate
- Any fishing boat proceeds
- Medical and health care payments
- Crop insurance proceeds
- Payments to an attorney
- Section 409A deferrals
- Nonqualified deferred compensation
You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, for the purpose of filing 1099-MISC, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers’ cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.
Exceptions. Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following:
- Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation).
- Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
- Payments of rent to real estate agents or property managers. However, the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner.
- Wages paid to employees (report on Form W-2, Wage and Tax Statement).
- Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2).
- Business travel allowances paid to employees (may be reportable on Form W-2).
- Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.).
- Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.
- Payments made to or for homeowners from the HFA Hardest Hit Fund or similar state program (report on Form 1098-MA).
- Compensation for injuries or sickness by the Department of Justice as a public safety officer disability or survivor’s benefit, or under a state program that provides benefits for surviving dependents of a public safety officer who has died as the direct and proximate result of a personal injury sustained in the line of duty.
- Compensation for wrongful incarceration for any criminal offense for which there was a conviction under federal or state law. See section 139F, Certain amounts received by wrongfully incarcerated individuals.
Are you expecting to receive a 1099-MISC this taxable year? At 1099 Accountant, we offer tax consultation and bookkeeping needs. Contact us toll free at (855) 529 1099 or send us an email at firstname.lastname@example.org. You may also book your appointment directly at https://1099accountant.com/contact/