Form 1099-MISC reports payments other than nonemployee compensation made by a trade or business to others. This article answers the question, "What is the 1099-MISC form?" after the reintroduction of the 1099-NEC.
Payments to others
If you are involved in a trade or business and receive payments from other people or entities, these transactions will likely be reported to you and the IRS if they total more than certain amounts during the tax year. Depending on the nature of these payments, the IRS requires the amounts paid to be reported on either Form 1099-MISC in the case of payments for rent, royalties, prizes and awards, substitute payments in lieu of dividends and other items or 1099-NEC if the payments represent nonemployee compensation.
Prior to tax year 2020 these payments usually appeared on Form 1099-MISC. Now, businesses must separately report nonemployee compensation on Form 1099-NEC. Any payments made to employees, including income, retirement contributions, insurance payments, expense reimbursements and travel expenses, typically go on Form W-2. Other than the change for nonemployee compensation, the use of Form 1099-MISC remains mostly the same for payment reporting.
This article looks at the Form 1099-MISC and what self-employed people and businesses use it for today.
What's changed on the new 1099-MISC?
If you received certain payments above certain amounts for your trade or business unrelated to nonemployee compensation for the following items, they will typically be reported to you on Form 1099-MISC:
- At least $10 in royalties (box 2) or broker payments in lieu of dividends or tax-exempt interest (box 8).
- At least $600 in:
- Rent (box 1);
- Prizes and awards (box 3);
- Other income payments (box 3);
- Generally, the cash paid from a notional principal contract to an individual, partnership or estate (box 3);
- Any fishing boat proceeds (box 5);
- Medical and health care payments (box 6);
- Crop insurance proceeds (box 9);
- Payments to an attorney (box 10);
- Section 409A deferrals (box 12); or
- Nonqualified deferred compensation (box 14).
- You should also receive Form 1099-MISC from any business or person that withheld any federal income tax on your behalf under backup withholding rules, regardless of amount withheld or the amount paid.
Direct sales made of $5,000 or more will be reported on either Form 1099-MISC or Form 1099-NEC. If the latter is used, it must be filed furnished to you by January 31.
Where is nonemployee compensation reported?
Prior to tax year 2020, nonemployee compensation was reported on Form 1099-MISC alongside the other items detailed above. Beginning with the 2020 tax year, if you were self-employed, a freelancer, contractor, or had other side gigs, you will receive Form 1099-NEC reporting nonemployee compensation and it must be furnished to you by January 31.
This includes payments of at least $600 received for services rendered in the course of business to a partnership, estate, or individual as a nonemployee. Nonemployee compensation can include:
- Prizes and awards for services performed by a nonemployee
- Other forms of compensation for services performed for your trade or business by an individual who isn't your employee
Who should file Form 1099-MISC?
Form 1099-MISC reports payments made to others in the course of your trade or business, not including those made to employees or for nonemployee compensation.
If you are self-employed as a freelancer or independent contractor, you may file and receive 1099-MISC forms depending on the nature and actions of your trade or business. Though, for reporting nonemployee compensation in exchange for products and services rendered, you will typically use Form 1099-NEC.
Landlords are typically required to file 1099-MISC forms for payments made to property managers, contractors, attorneys, repair professionals and anyone else who performs services for your property and does not qualify as your employee. You report instances where these payments equal $600 or more during the year.
You must also file Form 1099-MISC for each person from whom you've withheld any federal income tax under backup withholding rules, regardless of the payment amount.
The deadline for sending a 1099-MISC to a recipient is January 31 or the following business day, which means the people you send this form to for tax year 2023 have to receive it by February 1, 2024.
The due date for filing Form 1099-MISC with the IRS is February 28, 2024, if you file on paper, or March 31, 2024, if you file electronically.
Information included on the 1099-MISC
Besides the payments you’ve made or received, the 1099-MISC also includes some of your personal information such as your name, address and either your Social Security number or employer identification number. Most importantly, it will classify each type of payment in separate boxes on the form depending on the reason for your payment.
Since you typically aren't subject to withholding as an independent contractor, you likely need to make estimated tax payments throughout the year. But since you can calculate precisely what you owe, you can ensure you don't pay too much in income tax during the year.
You can use TurboTax to prepare your taxes, or get a copy of the worksheet accompanying Form 1040-ES and work your way through it.
What to do for self-employed back taxes
Having back taxes hanging over your head is never good. If you need to file back tax returns as a self-employed individual, you can use the Forms 1099-MISC that you received through tax year 2019 to help you determine your self-employed income. Beginning with the 2020 tax year you will likely receive Form 1099-NEC for income that you received during the tax year. Remember that even if you did not receive a 1099 form, you still need to report all of your income for the tax year.
Failure to pay your back taxes can result in negative outcomes, including having a tax lien filed on your property, garnishing your self-employment income, or even possibly facing jail time. If you failed to report all of your income, work with the IRS to make your situation right.
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