Form 1099-MISC is used to report payments to non-employees. A non-employee is defined as a person or business who is not employed by your company, such as independent contractors, freelancers, or outsourcing companies. This includes persons such as cleaning services, IT support, or maintenance services.
The IRS instructs that a 1099-MISC form must be completed each person who, in the previous tax year, has been paid:
- at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
- at least $600 in:
- services performed by someone who is not your employee
- prizes and awards
- other income payments
- medical and health care payments
- crop insurance proceeds
- cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- payments to an attorney
- any fishing boat proceeds
- direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
There are some notable exceptions to payments that are not required to be reported on a Form 1099-MISC. These include:
- 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.
- Wages paid to employees (report on Form W-2, Wage and Tax Statement).
However, there are or may be some exceptions to the exceptions. It is always best to consult your tax advisor to determine if you should send out a Form W-9 to request information to a payee.
See the instructions for Form 1099-MISC by the IRS for more details.
Information Needed to Prepare Form 1099-MISC
Once you have determined who must receive a Form 1099-MISC, you can request their information through a W-9 form. A W-9 form, like W-4s for employees, will provide you with the relevant information for the recipient such as their name, address, and tax identification number.
After retrieving a completed W-9 from the non-employee, you will use the information provided and the finalized amounts paid to prepare a 1099-MISC.
Form 1099-MISC Deadline
1099-MISC forms must be filed with the IRS and submitted to their recipients by January 31, 2020 for income reported in the 2019 Tax Year.