1099 MISC Form

Form 1099-MISC is a variant of Form 1099 used to report miscellaneous income.

Purpose of Filing Form 1099 MISC

One common use of Form 1099-MISC is to report payments by a business to independent contractors. Form 1099-MISC needs to be issued only when the total amount paid during the tax year is at least $600, though the form may still be issued at lower amounts. Since Form 1099-MISC only concerns payments made to an individual as an independent contractor, if an individual becomes an employee later, the $600 threshold need to be met only for part of work done as an independent contractor.

Other uses of Form 1099-MISC include rental income, royalties, and Indian gaming profits. When payments are made through third-part networks, filing Form 1099-MISC is not required. Instead,Form 1099-K will be filed by the payment service. Nevertheless Form 1099-MISC may still be issued.

What should be reported through 1099 MISC?

You must file 1099-MISC forms if you have paid a nonemployee $600 or more during the year. But, there are other requirements depending on the type of payments and the relationship between the payor and payee. File this form for each person to whom you have paid during the year:

  • at least $10 in royalties, broker payments or tax exempt interest (corresponds with 1099-MISC box 2). A Simple example of royalty payment is a payment made to an author for the rights.
  • at least $600 in:
    • Rents: (Box 1 on 1099-MISC) Here you report rental payments if your business rents property, such as equipment, cars or real estate.
    • Prizes and awards: (Box 3 and Box 7) This applies to prizes and winnners of contest awarded by your business since the wineers have to pay taxes on prizes.
    • Other income payments: (Box 3) A simple example is payments for punitive damages.
    • Medical and health care payments: (Box 6) This applies to any payments made by your business to doctors or suppliers/providers of medical services.
    • Cash payments : The cash paid from a notional principal contract to an individual, partnership, or estate. Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
    • Crop insurance : This applies to payments made for crop insurance proceeds.
    • Payments to an attorney : (box 14 and box 7) Payments made to an attorney for a legal settlement are typically reported in Box 14. For any legal services provided directly to a payor, the service fees to an attorney is reported in Box 7.

Exceptions for 1099-MISC Reporting

All payments made by you to a corporation do not typically require a 1099-MISC. This means that if you make payments to a caompany that is incorporated then you don not report this on 1099-MISC unless you have paid for attorney fees.

Filing Deadline: When to File a 1099-MISC?

A copy of the 1099-MISC is due to independent contractors by January 31 for the previous calendar year. January 31 is the deadline for filing the 1099-MISC with the IRS, if data is entered in Box 7 (non-employee compensation).

1099 MISC Copies

Copy A - File with IRS by the paper or electronic-filing before the deadline.

Copy B - Send this copy to individuals so that they can file it with their federal income tax return. Employer will meet the IRS' distribution requirement if the form is properly addressed and mailed on or before January 31.

Copy C - This copy is retained by the employer for their record.

Copy 1 - File with the appropriate state tax authority, if applicable.

Copy 2 - Send this copy to individuals to file this copy with their state tax authority.

1099 MISC Correction

Use this form to correct payment and withholding amounts on a 1099-MISC form you previously filed with the IRS.

Liabilities

If the payer does not file Form 1099-MISC, there is a maximum penalty of $250 per form not filed, up to $500,000 per year. Otherwise for late filings the penalty varies from $30 to $100, depending on how late the filing was.

There is a penalty to the payee for not paying income tax for the income referenced by Form 1099-MISC. The penalty is up to 20% of the underpayment.


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