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:
– Rents (box 1)
– Prizes and awards (box 3)
– Other income payments (box 3)
– Generally, the cash paid from a notional principal contract to an individual, partnership, or estate (box 3)
– Any fishing boat proceeds (box 5)
– Medical and health care payments (box 6)
– Crop insurance proceeds (box 5)
– Payments to an attorney (box 10)
– Section 409A deferrals (box 12)
– Nonqualified deferred compensation (box 14)
- A Form 1099-MISC must be filed for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of payment.
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).
- Many other exceptions exist and can be found on the IRS instructions for Form 1099-MISC, please see below.
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 e-filed with the IRS by March 31, 2021 and submitted to their recipients by February 1, 2021 for income reported in the 2020 Tax Year.
Need more information?
For more information on filing Forms 1099-MISC, please see our other blog posts:
- Gathering Information to Prepare Forms 1099-MISC
- Preparing Form 1099-MISC
- Common Errors for Form 1099-MISC
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BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.