A 1099-MISC is a tax form used in the U.S to report miscellaneous forms of income, like rent payments and royalties.
Until 2020, 1099-MISC was used to report payments made to freelancers and contractors. That changed with the introduction of the 1099-NEC, which replaced it for that purpose. Independent contractors must now provide employers with an 1099-NEC, not a 1099-MISC. Meanwhile, Form 1099-MISC became reserved for different types of non-employee payments.
Who must report Form 1099-MISC?
A company or individual has to report a Form-MISC for each person they paid during a tax year. Examples of qualifications include:
- A minimum of $10 in royalties
- A minimum payment of $600 in the form of things like:
- Prizes and awards
- Payments to an attorney
- Other income payments
Form 1099-MISC may also be used for the direct sale of at least $5000 of a consumer product to a buyer for resale. This applies only to sales made to non-permanent retail establishments – a flea market, for example.
The difference between a 1099-MISC and a W-9
Form 1099-MISC is used in terms of the actual reporting. The W-9, meanwhile, is a form that collects the payee’s info for the purpose of payment, including name, address, and taxpayer identification number.
How to fill out a 1099-MISC
Businesses can get form 1099-MISC on the IRS website. The form has three copies: Copy A, Copy B, and Copy C. The forms will have the same information, but need to be sent to different places.
Copy A goes to the IRS. Copy 1 goes to the recipient’s state tax department and Copy B is for the recipient. Copy 2 is attached with the recipient’s state tax return, and Copy C stays with the payer.
To fill out Form 1099-MISC correctly, entities need to pay attention to the boxes, which note which kind of payment was made. For instance, Box 1 is for rent, Box 2 for Royalties, Box 4 for Federal Income Tax Withheld, and so on.
If applicable, businesses or individuals will also need to check the Foreign Account Tax Compliance Act filing requirement for any foreign assets that may be subject to withholding under FATCA reporting.
How to file Form 1099-MISC
To the payee
Businesses/individuals must expected mail 1099s to the recipient’s address or receive consent to send it electronically.
To the IRS
To file online, the Internal Revenue Service uses the IRS Filing Information Returns Electronically (FIRE) system. Employers or individuals will need a a third-party software or filing service to generate the forms because the IRS doesn’t accept scanned or manually-completed versions.
Entities filing fewer than 250 forms, do not need to efile and can send forms by mail instead.
Managing non-employee tax forms for a global workforce
Until 2020, Form 1099-MISC was used the way Form 1099-NEC is used today — to report payroll payments made to freelancers and contractors.
This is testament to how tax forms like these are constantly subject to change. For companies managing global workforce, this presents a challenge. With multiple currencies, a medley of regulatory ecosystems, and a maze of compliance procedures, it can be difficult to create an efficient process free of human error and delayed payments.
This is where a payment distribution platform comes in. With expertise in the compliance requirements of multiple countries, and advanced technology to handle different currencies and keep track of data, a high-quality third-party platform can change the game for companies that need to deal with non-employee payments – whether it’s a one-time occurrence, or on a regular basis.
What types of income payments needs to be reported in 1099-misc
IRS Form 1099-MISC is used to report miscellaneous items of income, which includes:
- Rents: Including owned property renting to a business
- Royalties: Payments made for the use of owned property (ie. oil, gas, mineral properties, copyrights, patients, and more)
- Other income: A deceased employee’s wages going to an estate or beneficiary, awards and prizes, damages, and juror’s compensation
- Medical and healthcare payments: Includes payments made by medical and health care insurers towards health, accident and sickness insurance programs
- Nonemployee compensation: Refers to income independent contractors earn from a business
Form 1099 due date
Businesses or individuals must provide a completed 1099-MISC to the payee by January 31st. The payee will use the slip to complete their own tax filing.
The due date to file with the IRS is February 28 if filing on paper, and March 31 if filing electronically.
What are the other 1099 forms?
There are many other 1099 forms. Here’s are a few and their main purposes:
- Form 1099-A Acquisition or Abandonment of Secured Property: For acquiring property or holding an interest in property in lieu of an unpaid debt.
- Form 1099-CAP Changes in Corporate Control and Capital Structure: For shareholders of a company that undergo changes in control or structure.
- Form 1099-DIV Dividends and Distributions: For dividends or other investment distributions.
- Form 1099-H Health Coverage Tax Credit (HCTC) Advance Payments: Those who received advances on qualified health insurance payments from eligible trade adjustment assistance (TAA), Reemployment TAA, or Pension Benefit Guaranty Corporation (PBGC) benefits.
- Form 1099-INT Interest Income: Those who received more than $10 in interest from a bank or other financial institution.