If you run a business or are involved in trade, get payments from customers or entities, the IRS may require you to report these transactions using Form 1099-MISC. It accompanies payments for royalties, rent, healthcare payments, awards, substitute transactions instead of dividends, and other goods. Our guide will clarify the Form 1099-MISC meaning, explain its purpose, and simplify the filling-out session for you.
What Is Form 1099-MISC: Miscellaneous Income?
A fillable 1099-MISC form reports certain types of miscellaneous income. It has served to report these transactions up to 2020, but now business owners are required to fill out Form 1099-NEC additionally to indicate nonemployee compensation. Both these forms are related to business payments, not individual ones. A taxpayer will get Form 1099-MISC at the end of the tax year if you paid them $10 or more in royalties or more than $600 in other types of miscellaneous income throughout a calendar year.
Who Can File Form 1099-MISC?
The form records that an entity or a person who is not your employer made a money transaction to you. Any individual listed below is eligible to file this document:
- you have to file a 1099-MISC form if you paid at least $10 in broker payments or royalties instead of tax-exempt interest or dividends to another party;
- regardless of the payment sum, you have to file this form for each person from whom you’ve withheld federal income taxes under backup withholding regulations;
- any independent contractor or self-employed freelancer may file and receive a 1099-MISC form depending on the nature of their services or business;
- landlords must file this form for payments excessive of $600 made to anyone who performed services for their property during the year and didn’t qualify as their employee.
How to Fill Out a 1099-MISC Form?
You can get a fillable form template either on the IRS website or on a specialized online platform. Follow these steps for a smooth filling-out procedure:
- Landlords who got $600 or more for machinery, pasture, farmland, or office space rent have to indicate the sum in section 1.
- Report any royalties of more than $10 in field 2. Royalties cover license fees for copyrights, patents, and trademarks.
- In section 3, report your income of $600 or more that doesn’t fit any other box in the form. This refers to any transaction made to people involved in a medical research study, money paid to previously self-employed insurance agents, monetary awards or prizes, and payments for any taxable damages.
- Inbox 4, write down the sum of withheld taxes for a person who is subject to backup withholding or has not furnished a TIN.
- Box 5 serves to indicate fishing boat proceeds.
- Include medical and healthcare payments in section 6.
- Infield 7, put a mark in the checkbox if you sold goods of $5,000 or more to a person for further resale.
- Other boxes in a 1099-MISC form cover particular types of payments.
Their brief description is noted on the back of the form.
You don’t have to print out Copy A of the form since it’s used only by the IRS; print only the black parts of the form and send it to the recipient.
How to File 1099-MISC Form?
You have to send a 1099-MISC form to a recipient by January 31 or the following business day so that another party could receive it by February 1. If you file the form on paper, the deadline is February 28, 2022, and if you file electronically, the due date for filing it with the IRS is March 31, 2022.
Since the form is multipart, there are several copies:
- Copy 1 comes to the state tax department of the recipient;
- Copy B goes to the recipient;
- Copy 2 is sent to the recipient so that they could add this document to their tax return;
- Copy C is kept by the payer.
File Your Tax Forms Like a Pro
Hopingly, the above guide has given you some confidence that filling out this form is not as hard as it might seem at first. Work your way through the fields, complete the form by the deadline, and don’t let your taxes hang over your head. Do you require assistance during tax time or fill out forms on your own? Share your experience in the comments below.
Based on an article by pdfliner.com