Step-by-step Guide for Filling out Form 1099-MISC
Although Form 1099-MISC is no longer used to report non-employee compensation to the IRS, many businesses are still required to file this form each year with the IRS.
Here is a complete guide to completing Form 1099-MISC for the 2021 tax year.
What is Form 1099-MISC?
Form 1099-MISC is an IRS tax form that is used to report a series of miscellaneous payments of over $600 to the IRS. These payments are made outside of the business’s payroll and no longer include non-employee compensation. All non-employee compensation should be reported on Form 1099-NEC from the 2020 tax year and beyond.
The types of payments included on Form 1099-MISC include:
- Rents
- Prizes and awards
- Other income payments
- Medical and health care payments
- Payments to an attorney
- Crop insurance proceeds
- Cash paid from a notional principal contract to an individual, partnership, or estate
- Fishing boat proceeds
- Section 409A deferrals
- Nonqualified deferred compensation
- Payments made for direct sales of more than $5,000 of consumer products for resale anywhere other than a permanent retail establishment.
- Payments of $10 or more in royalties or broker payments instead of dividends or tax-exempt interest.
The business reporting these payments to the IRS is referred to as the “payer”. The recipient of the payment is often referred to as the “payee”.
What are the Deadlines for Filing Form 1099-MISC?
There are three major deadlines for Form 1099-MISC that businesses must adhere to. Failing to do so can result in IRS penalties and interest.
Payers must furnish the payment recipients with copies of Form 1099-MISC, the deadline to do this was January 31, 2022.
Payers that plan to file paper copies of Form 1099-MISC must do so by February 28, 2022.
Payers planning to e-file their Forms 1099-MISC have until March 31, 2022, to do so.
What Information is Required to Fill out Form 1099-MISC?
Businesses will need the following information to complete IRS Form 1099-MISC.
- Your basic business information is also referred to as “payer details” (Name, address, EIN).
- The recipient’s basic information, also known as “payee details” (Name, address, EIN/SSN)
- Federal withholding information
- State information such as the state tax withholding and Payer State Number.
Completing Form 1099-MISC Box-by-Box
To complete the 1099-MISC Form, you will need to fill out each box as needed and enter the payer and recipient/payee’s basic information. There are a total of 17 boxes. Here is an overview of what information is required for each of them.
To get started you will need to enter your own business, or “payer” information and your recipient’s information. If this recipient has an account number, you should enter it.
- Enter any rent payments in Box 1.
- Enter any royalties payments that are applicable in Box 2.
- Any other applicable income should be entered in Box 3.
- Enter any federal income tax that was withheld from the recipient in
Box 4. - Box 5 is for any applicable fishing boat proceeds.
- Box 6 is designated for any applicable medical and healthcare payments to the recipient.
- Check Box 7 if you made direct sales of over $10,000 to the recipient for resale.
- For any payments made as a substitute for dividends or interest, enter the amount in Box 8.
- Enter any applicable crop insurance proceeds in Box 9.
- Box 10 should be used to report gross proceeds that were paid to an attorney.
- If you made a purchase of fish for resale, enter the amount in Box 11.
- Enter the amount of any Section 409A deferrals in Box 12.
If this recipient has a FATCA Requirement, you will need to check the box, they should have indicated this on their Form W-9. FATCA stands for the Foreign Account Tax Compliance Act. For more information on FATCA requirements, check out this IRS resource.
If you have sent the recipient a second notice that their TIN is incorrect or missing, check the box, 2nd TIN not.
- If any excess golden parachute payments were made, enter them in Box 14. Golden parachute payments are generally those made to certain executives of a company when it is acquired.
- Box 15 is used to report any nonqualified deferred compensation.
- The remaining boxes are dedicated to state information. Enter any state tax withholding in Box 16 and enter the state’s payer number in Box 17. If there was any state income, enter this in Box 18.
Are there Penalties for Filing Form 1099-MISC?
When it comes to potential IRS penalties it is important to ere on the side of caution. The best way to ensure that you avoid IRS penalties is to file as accurately as possible and by the deadlines that the IRS has laid out.
In terms of information returns, the penalty amount varies and can ONLY be decided and levied by the IRS. However, for your reference, the IRS can charge anywhere from $50-$570 per information return.
You can learn more about penalties from this IRS resource.
Advantages of E-filing Form 1099-MISC
When it comes to the IRS filing options, not all methods are created equal. While mailing paper copies is an acceptable method of filing, it isn’t the most efficient, accurate, or convenient.
The IRS actually prefers that you file your forms electronically. It makes the forms easier for the IRS to process on their end, resulting in a quicker approval of your form.
When e-filing with an IRS authorized e-file provider, the filing process is easier and more accurate. If your provider offers built-in calculations and checks against the IRS Business Rules, many common errors can be caught and corrected BEFORE you file. This eliminates the need to file a correction after filing 1099-MISC the first time!
