Who Needs to File Form 1099-MISC?

A 1099-MISC form must be filed with the IRS for each person a business has paid during that year. The IRS uses Form 1099-MISC in fighting under-reporting by self-employed individuals. Hiring employers should not take filing Form 1099-MISC lightly, as there could be stiff penalties for failure to file 1099-MISC.

When From 1099-MISC needs to be filed?

Whenever a business pays an unincorporated independent contractor during the course of their business, a 1099-MISC may be needed. A 1099-MISC is not needed if payment is for non-business-related activities. The payments made for household or personal services like gardeners, babysitters, and housekeepers are not considered business-related and hence do not have to be reported on Form 1099-MISC. Here are all the payments that are reported on Form 1099-MISC:

Royalty payments – royalty payments of more than $10 need to be reported. Royalties from oil, gas, or other minerals, from intangible properties like patents, copyrights, trademarks, etc. are reported.

Rent payments of over $600 must be reported. Some examples of rent payments are real estate rentals, machine rentals, etc.

Prizes and Awards payment of over $600 – including merchandise won (report fair market value) and amounts paid to sweepstakes winners.

If a business withheld income tax from the payments it made, the withholding amount must be reported.

Any fishing boat proceeds of over $600 must be reported on Form 1099-MISC.

Medical and healthcare payments of over $600 paid to a physician or healthcare provider must be reported. You are required to report medical or healthcare payments made even to corporations. The exception for corporations does not apply for medical payments.

Substitute payments of at least $10 in lieu of dividends or interests.

Crop insurance proceeds of over $600 paid to farmers.

Gross proceeds of over $600 paid to an attorney must be reported.

Section 409A deferrals of over $600 are reported.

Any Excess Golden Parachutes payments (any payment over the base amount or original compensation) are reported.

Nonqualified deferred compensations are reported.

 

When is 1099-MISC not needed? Exceptions.

Rental payments made to a real estate agent or property manager do not have to be reported.

Amount paid to sweepstakes winners do not have to be reported on Form 1099-MISC is wager is made, instead use Form W-2G.

Awards paid to employees are not reported on Form 1099-MISC; instead, use Form W-2.

Attorney fees of over $600 paid to an attorney are not reported on Form 1099-MISC, instead, use Form 1099-NEC.

Nonqualified deferred compensation reported on 1099-MISC is also reportable on Form 1099-NEC.

 

For more information, please read the instructions for Form 1099-MISC.

Important Note:

With the introduction of Form 1099-NEC, there have been some changes to Form 1099-MISC. Now the non-employees compensations are not reported on Form 1099-MISC. Please check out the 1099-NEC filing requirements.