How to Read a 1099-MISC Tax Form

Updated for Tax Year 2019


OVERVIEW

Are you self employed? Each business or client that paid you more than $600 for the year should send you a 1099-MISC. Think of it like a W-2 for self-employed people.


If you’re self-employed, even if just for part of the year, chances are you’ll get one or more 1099-MISC forms at tax time. Each business or client that paid you more than $600 for the year should send you a 1099-MISC. Think of it like a W-2 for self-employed people. For you, Box 7: Nonemployee compensation, is the most important place to look. That’s where the amounts paid to you should be reported.

Form 1099-MISC also includes other types of payments you may need to report on your tax return. This guide will help you understand some of the key pieces of information reported on the 1099-MISC, that you’ll need when preparing your tax return.

Box 1: Rents

If someone pays you rent for office space, farmland or pasture, or machinery, this figure will be reported in Box 1. Only amounts of $600 or more are required to be reported.

Box 2: Royalties

Box 2 reports any royalties you received in excess of $10. Royalties generally cover license fees for copyrights, patents and trademarks.

Box 7: Nonemployee Compensation

The IRS considers any money you earn from an individual or business that does not officially employ you to be taxable self-employment income. The employer must report this income in box 7 of Form 1099-MISC for each person they paid more than $600 for the year. For example, if you earned money as an independent contractor, that income would be reported in Box 7.

Self-employed taxpayers generally aren’t subject to income tax withholding. In most cases, boxes 4 and 16, which report federal and state income tax withholding, will be empty. However, if you fail to provide each of your clients with a completed W-9 form that provides your taxpayer identification number, you may be subject to backup withholding.

Other 1099-MISC boxes

Box 3 covers reportable payments not specifically covered elsewhere, like prize winnings or termination payments not considered wages. The remaining boxes report specific types of payments. For example, Box 5 may report some of the proceeds from the sale of fish if you’re a fisherman. Box 6 is for payments received for providing health care services, and box 9 is for proceeds from the sale of certain consumer goods. If you're stuck, the back of the form provides a brief description of the types of payments to be reported in each box.

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