Back to School Basics - Form
1099 MISC
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Purpose of Form 1099 MISC
Typical Recipients
Overview – Line by Line Detail
Filing Requirements

Purpose of Form 1099 MISC
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A record of income received from a business for services rendered
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Cost-cutting alternative for companies needing specific tasks completed
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Non-employee compensation means no company paid taxes
No need to provide benefits or offer employee incentives
No risk of investment loss to the company
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Typically the relationship can be ended once the task is completed

Form 1099 MISC Recipients
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Independent Contractor or “freelancer”
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Actors, novelists, freelance writers and other creative artists
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Also used to report income from the following :
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At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
Gross proceeds of $600 or more paid to an attorney
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Fishing boat proceeds
$600 or more in Rents, services, prizes and awards

Form 1099 MISC Recipients
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$600 or more in medical and health care payments, crop insurance proceeds, cash payments for fish
$600 or more in cash paid from a national principal contract to an individual, partnership, or estate
$600 or more in other income payments
 direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

Overview – Line By Line Detail
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Payroll departments usually handle the “other income” payments and nonemployee compensation
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Overview – Line By Line Detail
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Payer’s Information
Identification Numbers
Recipient’s Information
Account Information
2 nd TIN Not

Overview – Line By Line Detail
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Box 1 – Rents
Box 2 – Royalties
Box 3 – Other Income
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Prizes and awards
FMV of merchandise from game shows or sweepstakes
Punitive Damages
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Compensatory damages for non-physical injuries or sickness
Damages received for emotional distress
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Physical symptoms from emotional distress reportable
Damages received due to emotional distress from physical injuries or sickness NOT reportable

Overview – Line By Line Detail
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Payments of a deceased employee’s wages
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Estate or Beneficiary
Payments of Indian gaming profits or to Tribal Members
Termination payments to self-employed insurance salespeople
Box 4 – Federal Income Tax Withheld
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Backup Withholding
Box 5 – Fishing Boat Proceeds

Overview – Line By Line Detail
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Box 6 – Medical and Health Care Payments
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$600 or more to physicians and medical/health care service providers
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Includes payments made by medical and health care insurers under health, accident and sickness insurance programs
No requirement to report payments to pharmacies for prescription drugs
*Corporation exemption applies when payments made to a health care provider are done through a credit or debit card in an FSA, HRA or HSA.

Overview – Line By Line Detail
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Box 7 – Nonemployee Compensation
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$600 or more
Fees, commissions, prizes and awards for services performed
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Expenses incurred for the use of an entertainment facility
Federal executive agencies
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Conditional Guidelines
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Non employee payment
Services in the course of the payer’s trade or business
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Individual or partnership
$600 or more

Overview – Line By Line Detail
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Box 7 common examples
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Professional Service Fees
Referral Fees
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Fees and travel reimbursement not accounted to the payer if the fee and reimbursement total is at least $600 or more
Non-employee entertainers for services
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Taxable Fringe Benefits to nonemployees
Directors fees
Nonqualified deferred compensation (409A)

Overview – Line By Line Detail
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Box 8 – Substitute Payments in Lieu of Dividends or Interest
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Definition of “Substitute Payment” means a payment in lieu of:
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Tax-exempt interest that has accrued while a short sale was open and
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A dividend if the ex-dividend date is after the transfer of stock for use in a short sale and before the closing of the short sale

Overview – Line By Line Detail
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Box 9 – Payer Made Direct Sales of $5,000 or More of
Consumer Products to a Buyer (Recipient) for Resale
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Enter X if applicable
Do not enter a dollar amount
Box 10 – Crop Insurance Proceeds
Boxes 11 and 12 – Foreign Tax Paid and Foreign Country or US Possession (For 2013)
Box 13 – Excess Golden Parachute Payments
Box 14 – Gross Proceeds Paid to an Attorney

Overview – Line By Line Detail
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Box 15a – Section 409A Deferrals
Box 15b – Section 409A Income
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Amounts considered subject to a substantial risk of forfeiture are not included
Also reported in Box 7
Box 16 – State Income Tax Withheld
Box 17 – State/Payer’s State Number
Box 18 State Income

Filing Requirements
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TIN (Tax Identification Number)
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What is a TIN
When is a TIN required
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Missing or Incorrect TIN
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Not provided
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Less than 9 digits
Mixture of digits and numbers

Filing Requirements
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IRS 1099 TIN Matching Process
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TIN’s are matched against two files:
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All SSN’s issued by the SSA
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All IRS assigned employer identification numbers (EINs)
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CP2100/2100A Notice
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“B” Notice
Incorrectly Reported TIN by the payee
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Correct the data in the system, do not send B Notice

Filing Requirements
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Provided TIN and Name Control do not match
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Send B Notice to payee
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Procedure when a TIN is not Provided
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Backup Withholding @ 28%
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W-9
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Report withholding on Form 945- Annual Return of Federal
Income Tax Withheld

Filing Requirements
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When to File 1099 MISC
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Reporting Period
February 28 th of the following Tax Year
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Form 1096
Must be properly addressed and mailed by the due date to be considered timely
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Holidays and Weekend due dates

Filing Requirements
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Electronic Reporting
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Automatic Extension of 1 month
Must be reported via Filing Information Returns
Electronically (FIRE) system
250 or more forms
Recordkeeping Requirement
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3 years from the due date of the returns
4 years from the due date of the returns if backup withholding was imposed

Filing Requirements
* * E L E C T R O N I C F I L I N G I S N O T A C C E P T E D O N
M A G N E T I C M E D I A F O R 1 0 9 9 M I S C R E T U R N S * *
 https://fire.irs.gov
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Test files can be submitted in advance to http://fire.test.irs.gov

References http://www.irs.gov/pub/irs-pdf/i1099msc.pdf
- Instructions for Filing Forms
1099 MISC http://www.irs.gov/pub/irs-pdf/f1099msc.pdf
- Form 1099 MISC http://www.irs.gov/pub/irs-pdf/p1220_11.pdf - Publication 1220 , Specifications for Filing Forms 1099 electronically

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