Form 1099 is one of the IRS forms that is used to report income other than wage, salary, and other compensation. Form 1099-MISC, a variant of Form 1099 is used to report miscellaneous income. It is commonly used by businesses to report income paid to non-corporate U.S. contractors or freelancers.
Form 1099-MISC works similar to the Wage and Tax Statement Form W-2. The persons you issue this tax form will then use it to file their federal income tax returns. As a business owner, you are required to report miscellaneous income paid to individuals using the Form 1099-MISC.
Same as the Form W-2, you must file it before January 31st. Late filing Form 1099-MISC within 30 days of the due date is $50. This penalty amount can be as high as $270 for each Form 1099-MISC remains not filed. So not filing Form 1099-MISC on time is not a worth risk to take. Here is how to file the 2020 edition of Form 1099-MISC.
Form 1099 Miscellaneous Income
First and foremost, you can file a Form 1099-MISC electronically or on paper. If you have too much of this tax form to file, we recommend filling it electronically as it will take less of your time. Assuming you filed Forms W-2 in the past to your employees, you should not have a hard time with filing a Form 1099-MISC.
Here is how you can file a Form 1099-MISC for income paid to a contractor or a freelancer.
Other than the obvious things on Form 1099-MISC, you must enter the recipient’s TIN. You can obtain this by requesting the recipient to file a Form W-9. This requests the correct taxpayer identification number of the recipient. Without it, you won’t be able to file the Form 1099-MISC correctly. If the contractor or the freelancer fails to comply, you can forward a portion of the payment to the IRS.
Instructions Box by Box
Box 1. Rents
Enter the amounts of all types of rents.
Box 2. Royalties
Enter the total gross royalty payments.
Box 3. Other Income
If you can’t report income in any of the boxes on Form 1099-MISC because it doesn’t fit, enter the amounts paid here.
Box 4. Federal Tax Withheld
Enter the federal taxes withheld from the income paid to the recipient. Since you’re not going to withhold tax as you do for your employees, this will be filled when the recipient is subject to backup withholding.
Box 5. Fishing Boat Proceeds
Enter the recipient’s portion of the sale of a catch.
Box 6. Medical and Health Care Payments
Enter medical payments made to the recipient $600 or more.
Box 7. Payer Made Direct Sales of $5,000 or More
Check the box for sales of $5,000 or more by you, the payer.
Box 8. Substitute Paymetns in Lieu of Interest or Dividends
Enter the aggregate payments of substitute payments received by a broker for the customer.
Box 9. Crop Insurance Proceeds
Enter the crop insruance that is $600 or more paid.
Box 10. Gross Proceeds Paid to an Attorney
Enter the amount paid to an attorney for legal services that is $600 or more.
Box 12. Section 409A Deferrals
Enter the amount deferred during the course of the tax year that is $600 or more.
Box 13. Golden Parachute Payments
Enter excess golden parachute payments.
Box 14. Nonqualified Deferred Compensation
Enter all amounts deferred that are nonqualified. This includes the income under section 409A.
Box 15. State Tax Withheld
Enter the state income taxes withheld from the recipient’s income.
Box 16. State/Payer’s State Number
Enter your state number.
Box 17. State Income
Enter the total amount paid to the state.