If you own a small business, you might have paid vendors this year. There are many types of payments, ranging from rents to prizes and awards. If you paid a vendor, you might be required to file Form 1099-MISC. What is IRS Form 1099?
What is IRS Form 1099?
Form 1099-MISC, Miscellaneous Income, is an information return businesses use to report payments and miscellaneous income. As a small business owner, use the form to report certain payments you made during the year.
Who receives 1099-MISC?
You must file Form 1099-MISC for each person you have given the following types of payments to during the tax year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in the following:
- Prizes and awards
- Other income payments
- Cash from a notional principal contract to an individual, a partnership or an estate
- Any fishing boat proceeds
- Medical and health care payments
- Crop insurance proceeds
- Payments to an attorney
- Section 409A deferrals
- Nonqualified deferred compensation
As of 2020, do not use Form 1099-MISC to report nonemployee compensation. Use Form 1099-NEC to report independent contractor payments. And, do not use Form 1099-MISC for W-2 employees.
The IRS Instructions for Form 1099-MISC provide more specific information on other exemptions and who should receive a 1099.
When are 1099-MISC forms due?
You must file Form 1099 by the correct due date.
Vendors should receive Form 1099-MISC by February 1. There are several copies included in each 1099. You will send Copy B and Copy 2 to the vendor.
Submit Copy A to the IRS. When you submit 1099s to the IRS, you must also send Form 1096. Form 1096 is the summary form of all the 1099s you file. You will include the total amount of all your 1099 payments on Form 1096.
File Form 1099-MISC by March 1 if you’re filing a paper copy. If you’re e-Filing, file Form 1099-MISC by March 31.
Sometimes, you need to submit Copy 1 to your state’s tax department. Filing regulations vary from state to state. Check with your state’s tax department to find out your specific requirements.
Keep Copy C of the 1099 for your records.
|Copy of Form 1099-MISC||Where to send|
|Copy A||IRS, with Form 1096|
|Copy 1||State department, if applicable|
|Copy B||Recipient (vendor)|
|Copy 2||Recipient (vendor)|
|Copy C||Keep in your records|
What information do you need to file a 1099-MISC?
You need the following information to fill out Form 1099-MISC:
- Your name, address, and phone number
- Your TIN (Taxpayer Identification Number)
- Recipient’s TIN
- Recipient’s name and address
- Your account number, if applicable
- Amount you paid the recipient in the tax year
Where do you get the 1099-MISC?
You can view Form 1099 on the IRS website. But, that form is for informational purposes only and cannot be used to file Form 1099. Do not print and send Form 1099 from the IRS website.
To get the official 1099 form, order it on the IRS website or from a registered supplier (e.g., an office supply store).
How do you correct Form 1099-MISC?
If you discover an error on a 1099-MISC, you need to prepare a corrected 1099-MISC. You also need a new 1096 for every 1099 correction you submit.
To correct the form, fill out another 1099 and 1096 with the corrected information. Check the “corrected” box at the top of the 1099. Then, send the corrected copies to the vendor, the IRS, and required state departments.
Other types of 1099 forms
There are many types of 1099 forms besides Form 1099-MISC. Here is a list of other common types of 1099 Forms:
Form 1099-NEC, Nonemployee Compensation, is a form business owners use to report nonemployee compensation. Only use this form to report nonemployee compensation. Do not report other types of payments.
Use this form to report interest paid during the tax year. The form breaks down the most common types of interest.
The person or entity that made the interest payment fills out 1099-INT. Usually, that is the bank. Banks fill out Form 1099-INT for investors who had interest payouts over $10.
You would receive 1099-DIV if your investments paid dividends last year. Dividends include the profits that are regularly paid to shareholders. Form 1099-DIV is only for dividends.
Usually, you use 1099-G to report unemployment income. This form includes income from state or federal governments. 1099-G can also include tax refunds received the previous year. You use this form to note payments such as agricultural subsidies and government grants.
Use 1099-R to report the distribution of retirement income. Using this form does not automatically mean the distributed income will be taxed. The income is only reported. Your tax liability depends on how you deposited the money.
Use this form for debt forgiveness or cancellation. A lender fills out this form if the debt being forgiven or canceled is more than $600.
Some common methods to forgive debt include a short sale or home foreclosure. The sale results in a difference between the home’s value and the amount already paid. Or, you could do a settlement with a creditor. With a settlement, you pay less than a full amount owed.
Use 1099-S to report proceeds from the sale of real estate. For most people, Form 1099-S comes into play after the sale of a home.
The form also applies to nonhome real estate that is considered permanent. Permanent, nonhome real estate includes commercial buildings, under-developed land, airspace, and condominium units.
This form is used to handle online payment processors. This form requires payment processors (e.g., PayPal) to report income paid to individuals over the year.
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