How to Fill Out & File 1099 MISC Form: The Essential Guide
October 23, 2023
Learning how to fill out a 1099-MISC form correctly is crucial for filing your taxes correctly and avoiding hefty IRA fines. The 1099-MISC form is one of the many variations of 1099 forms, and it is used whenever specific types of miscellaneous payments are involved.
This article will guide you in understanding the purpose of this form, different steps on how to file a 1099-MISC, as well as tips on figuring out which boxes to fill out. You’ll also learn which dates you need to mark on your calendar to avoid missing any important 1099-MISC filing deadlines.
- The 1099-MISC form is used to report miscellaneous payments, such as payments to an attorney’s gross proceeds as part of a settlement agreement, healthcare services for businesses, awards, and prizes.
- The key to understanding how to fill out a 1099-MISC form is to know the uses of the different boxes or fields in the IRS form.
- The deadline for filing recipient copies of 1099-MISC is January 31, 2024; February 28, 2024, for paper-filed 1099-MISC forms; and April 1, 2024, for electronically filed 1099-MISCs.
- The 1099-NEC form is used to report all business payments made to independent contractors, freelancers, and self-employed individuals.
What is the 1099-MISC Form?
The 1099 MISC form is a variant of IRS Form 1099 and is used to report miscellaneous payments to medical and health care services, rent, proceeds for crop insurance, fishing boat revenues, rewards, and prizes.
It can be quite confusing to understand what a 1099 form is used for, considering that it has several different variations, such as the 1099-MISC, 1099-DIV, 1099-B, 1099-G, 1099-S, and 1099-NEC.
Generally, the 1099 Forms are used to report non-employment income based on the type of payment received and the circumstances involved in making or receiving the said payment.
The miscellaneous income reported using the 1099-MISC form should meet the set minimum amount, depending on the type of payment.
Check out the table below for more information:
Type of Payment
At least $10
Broker payments or royalties in place of tax-exempt interests
At least $5,000
Consumer goods not sold in a permanent retail shop or store
At least $600
Who Files the 1099-MISC Form?
Healthcare and medical service providers, real estate agents, fishermen, maintenance professionals, direct sellers, and vendors whose earnings fall under the miscellaneous payments described above file the 1099-MISC form.
The payee (or the people who file the 1099-MISC) waits for their client or payer to furnish their copy of the Form 1099-MISC.
Individuals who file 1099-MISC need the said form to report all of their earned income and file their tax returns. The failure to report all income could potentially lead to miscalculated tax liabilities.
Direct sales of consumer products worth at least $5,000 acquired by selling the goods to a purchaser for reselling purposes must also be reported on Form 1099-MISC.
Receiving a 1099-MISC form does not automatically mean owing taxes on the miscellaneous income or payment you received. Your miscellaneous payments may possibly qualify for tax deductions that significantly reduce your taxable income.
1099 MISC vs.1099 NEC Form
In the past, 1099-MISC was used to report payments to freelancers, independent contractors, and self-employed individuals. However, the IRS made changes to the purpose of the 1099-MISC after reviving the 1099-NEC Nonemployee Compensation form in 2020.
With the recent changes, all contractor payments made from 2020 up to the present must be reported on Form 1099-NEC.
Let’s nail down what Form 1099-NEC is all about to help you understand the distinctions between the two forms better and ensure you fill out your 1099-MISC form correctly.
IRS Form 1099-NEC is used by businesses to report certain types of non-employee compensation paid within the tax year, specifically if an individual or entity has paid at least $600 to a non-employee.
Non-employee compensation may be in the form of regular payment for a service or goods, as well as in the form of commissions, bonuses, or royalties.
In this case, a non-employee may be a freelancer or an independent contractor hired to fulfill contractual or project-based jobs. Self-employed individuals who have completed freelance work should receive a 1099-NEC form, provided that their earnings amount to $600 or more.
On the other hand, as mentioned earlier, the 1099 MISC form is now used to report income from reselling certain items or miscellaneous payments received from the sources outlined in the table above.
How to Fill Out the 1099-MISC Form
Listed and explained below are the different boxes to remember when filling out the 1099-MISC form:
- Box 1: Rents. All types of rent payments, whether they be for office and commercial spaces, real estate, machinery, farmland, or pastures, are reported in Box 1.
- Box 2: Royalties. This box is for reporting any royalties covering copyrights, trademarks, patents, and licenses that are worth $10 or more.
- Box 3: Other Income. Other income refers to any other type of income worth at least $600 that does not fall under any of the other Boxes in the 1099-MISC form. Examples of other income are monetary awards and prizes, termination payments to insurance sales personnel who are formerly self-employed, and payments made to an individual for punitive and taxable damages, sickness, and non-physical injuries.
- Box 4: Federal Income Tax Withheld. Use Box 4 to report any backup withholding for an individual who has not fulfilled their tax identification number.
- Box 5: Fishing Boat Proceeds. All fair market value distributions to all crew members of small fishing boats and all individual shares of proceeds from sales made from a catch are reported in Box 5.
- Box 6: Medical and Healthcare Payments. Box 6 is for reporting all payments worth $600 or more within a year to physicians, providers, and/or suppliers of healthcare and medical services received during the course of a business or trade. Payments from insurance providers to physicians and providers of medical services under accident, health, and sickness insurance programs are also reported in Box 6.
- Box 7: Payer Made Direct Sales of $5,000 or More. If this category applies to you, simply mark Box 7 ‘X’ and refrain from entering any dollar amount. You can include the information instead in a separate letter, with additional information on the sale or earned commission.
- Box 8: Substitute Payments in Lieu of Dividends or Interest. All aggregate payments worth $10 or more that a broker received for a client in place of tax-free interests and dividends following the loaning of the client’s assets.
- Box 9: Crop Insurance Proceeds. Crop insurance proceeds reported in Box 9 must be worth $600 or more.
- Box 10: Gross Proceeds Paid to an Attorney. Report all gross proceeds paid to an attorney in Box 10. Similar to crop insurance proceeds and healthcare payments, payments reported in Box 10 should amount to $600 or higher.
- Box 11: Fish Purchased for Resale. Report all fish purchases worth $600 or more paid in cash in Box 11.
- Box 12: Section 409A Deferrals. You are not required to fill out Box 12. See Notice 2008-115 for more information. But if you do fulfill Box 12, input the total deferred amount (must be at least $600) for the nonemployee who falls under nonqualified plans.
- Box 13: Excess Golden Parachute Payments. Examples of golden parachute payments include cash-based severance payments, stock options, and special bonuses.
- Box 14: Nonqualified Deferred Compensation. Use Box 14 if all amounts counted in the income described under Section 409A are deferred due to the failure to meet Section 409A’s requirements.
- Box 15 to Box 17: State Information. Box 15 to Box 17 is filled out by taxpayers who are mandated to file paper copies of Form 1099-MISC with a state tax department. If you joined the Combined Federal/State Filing Program, you must also fill in these three boxes.
It doesn’t take rocket science to learn how to fill out a 1099-MISC form using a 1099 generator because the said tool already contains all the necessary fields you would find in the IRS 1099-MISC form.
1099-MISC Form Deadline
The 1099-MISC form deadline for the tax year 2023 is January 31, 2024, for recipient copies. If you used Box 8 or 10 to report payments when filling out your 1099-MISC form, your filing due date is February 15, 2024.
Those who filed paper forms have until February 28, 2024, to fulfill their 1099-MISC. Meanwhile, the deadline for electronically filing Form 1099-MISC is April 1, 2024.
Note that there are late filing penalties if you fail to meet all the above-mentioned deadlines.
The penalties are as follows:
If you filed:
Within 30 days
$50 per form
$588,500 per year, or $206,000 for small businesses
After 30 days and before August 1
$110 per form
$1,669,500 per year, or $556,500 for small businesses
After August 1
$270 per form
$3,339,000 per year, or $1,113,000 for small businesses
You will also be penalized by the IRS if you fail to provide any reasonable explanation for failing to file your 1099-MISC form on time, file incorrectly filled out 1099-MISC forms on purpose, or participate in the fraudulent filing of your 1099 forms or any tax forms for that matter.
The IRS will charge you $550 for every erroneous statement on your 1099-MISC and at least $5,000 for filing fraudulent tax forms.
How to Send & File the 1099-MISC Form
The first thing you need to know before sending and filing the 1099-MISC form is the filing requirements.
Knowing how to fill out the 1099-MISC form won’t get you far if you don’t prepare the following information beforehand:
- Your business name, address, and contact information as the payer (you can also use your Employer Identification Number or your business’s Social Security Number)
- Your Tax Identification Number (TIN)
- Your recipient’s name, address, and contact details
- Your recipient’s TIN
- All amounts paid to your recipient
- Withheld federal income tax (if applicable)
- State number withheld state taxes (if any) and any other state and local information that apply
Once you have secured all the necessary information, you can file a paper form or electronically file your Form 1099-MISC and all other 1099 forms using the IRS’s Information Returns Intake System (IRIS).
In truth, you don’t need a complicated formula or extensive knowledge of every single IRS tax form to know how to fill out the 1099-MISC form.
All you need is to know the types of miscellaneous payments that you must report to the IRS and the filing deadlines to follow to avoid incurring penalties and fines.
Better yet, use a 1099 form generator to save time and ensure you input all the necessary information in your 1099-MISC.