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What is a 1099 MISC Form?
The 1099 MISC form is one of several subtypes of 1099 tax forms. Generally, 1099 forms are used to report payments and compensation between individuals or businesses.
1099 MISC documents miscellaneous income or payments made by businesses to contractors. These payments should amount to at least $10 in royalties or a minimum of $600 for the following:
- Attorney payments
- Awards or prizes
- Crop insurance proceeds
- Healthcare and medical payments
- Proceeds that go to fishing boats
- Cash payments for aquatic life purchased from vendors or traders whose main livelihood is fishing
- Cash-based compensations from notional principal contracts to an estate, individual, or a partnership
These income sources do not fall into any categories under the other types of 1099 forms.
How to Fill Out Your Form 1099-MISC
Your 1099 MISC form should include the following:
Payer and Recipient’s Information
First, you need to provide both your and your recipient’s basic information, specifically:
- Tax year
- How much you make before taxes last year
- Payer’s complete address
- Company name
- ZIP code
- Payer’s TIN (Company EIN)
- Recipients TIN (Social Security)
- Recipient’s name
- Recipient’s complete address
Box #1. Rents
Box 1 records paid rents worth at least $600.
Box #2. Royalties
Box 2 is where you input all royalties paid that are worth at least $10.
Box #3. Other Income
Box 3 registers prizes, awards, and any other forms of compensation besides wages.
Box #4. Federal Income Tax Withheld
Box 4 specifies any federal income tax withheld, particularly when backup withholding applies, which usually arises when the payer fails to provide the correct TIN, dividend income, or interest.
Box #5. Fishing Boat Proceeds
Box 5 reports all payments in the form of fishing boat proceeds.
Box #6. Medical & Healthcare Payments
Box 6 is filled out if medical and healthcare services worth at least $600 were provided within the duration of a trade or business.
Box #7. Payer Made Direct Sales of $5,000 or More of Consumer Products To a Buyer (Recipient) for Resale
Box 7 is checked only when the resale is made to any buyer or vendor, as long as it is not a permanent retail establishment.
Box #8. Substitute Payments in Lieu of Dividends or Interest
Box 8 reports a minimum of $10 in broker payments in place of dividends or interest exempt from taxes.
Box #9. Crop Insurance Proceeds
Box 9 is checked if an insurance company pays the farmer crop insurance proceeds worth $600.
Box #10. Gross Payments Made to an Attorney
Box 10 is for attorney payments or gross proceeds worth $600.
Box #11. Fish Purchased for Resale
Box 11 records payments made to purchase fish and aquatic life for the purpose of reselling.
Box #12. Section 409A Deferrals
Box 12 is where all Section 409A deferrals or deferrals of compensation are declared.
Box #13. FATCA Filing Requirement
Box 13 is filled out when a FATCA (Foreign Account Tax Compliance Act) filing requirement is needed.
Box #14. Excess Golden Parachute Payments
Box 14 reports the total remunerations made to excess golden parachute payments. These payments must be subject to an excise tax of 20%.
Box #15. Nonqualified Deferred Compensation
Box 15 is for compensation that an employee has earned but is yet to receive from their employers.
Box #16. State Tax Withheld
Box 16 reflects all state income taxes withheld from payments made by the business.
Box #17. State/Payer’s State No.
Box 17 shows the payer’s state identification number and the abbreviation of the state’s name.
Box #18. State Income
Box 18 specifies the amount of the state payment.
When Do You Need to Send the Form 1099-MISC?
Use Form 1099-MISC to report specific income sources or non-employment-related payments that do not fit into any other tax form. For instance, you pay at least $600 for the services of an attorney, carpenter, interior designer, or photographer or a sole proprietor who is a member of a Limited Liability Company (LLC) taxed as a partnership.
You will also use Form 1099-MISC if your business sends payments to a Limited Liability Company that is taxed as a corporation or sell at least $5,000 worth of consumer goods for the purpose of reselling the items.
1099-MISC Form Deadline
The deadline for businesses to submit Form 1099 MISC to the proper recipients was January 31, 2023. In turn, recipients who filed their taxes through the mail were given until February 28 to complete their forms. Those who used e-filing should have their tax forms ready by March 31.
Form 1099-MISC Exceptions
What are some exceptions to filing or submitting Form 1099-MISC? You don’t need to report or submit 1099 MISC forms for the following:
- Payments made to corporations or LLCs taxed as S or C corporations
- Payments to tax-exempt organizations
- Payments to homeowners and select state programs
- Payments to non-business related services such as household services, housekeeping, gardening, storage, merchandise, telegrams, and freight
- Payments to criminal informants
- Rent paid to real estate agents
- Military differentials while on active duty
- Allowances for business travel
- Scholarships and foster care
- Canceled debts
Common 1099-Misc Form Mistakes
While errors in filling out or filing the 1099-MISC form can be corrected, it is still important to be wary of the following common mistakes:
- Duplicating the forms or reports
- Failing to report all business-related expenses
- Logging the incorrect Tax Identification Number (TIN) of the payee
- Missing the deadlines for submitting 1099 MISC
- Mixing up the 1099 MISC with other types of 1099 forms
- Not collecting the independent contractor’s Form W-9 beforehand
- Over or underreporting the amounts specified in the form
- Paying quarterly taxes even when you are expecting less than $1000 in taxes owed for the year
- Providing incomplete information about the vendor or recipient of the form
- Using the 1099-MISC form to report non-employee compensation that’s subject to self-employment tax
- Using the incorrect boxes in the form
- Writing off expenses meant for personal use
- Writing off automobile and mileage expenses