Form 1099-MISC: Understanding the Boxes & Descriptions on Your Tax Form

Form 1099-MISC: Understanding the Boxes & Descriptions on Your Tax Form
••• Jae Young Ju/iStock/GettyImages

IRS Form 1099 is a record that a person or an entity other than your employer paid you or gave you some form of compensation in exchange for goods or services. It is a series of documents used to report various types of income that a person may receive other than salary from an employer.

For example, Form 1099-DIV reports dividend income from investments, especially stocks, and Form 1099-INT records interest received from investments such as bonds and certificates of deposit. Form 1099-C is unique in that it records an event that may increase your taxable income when a debtor cancels a debt.

Form 1099 MISC is a specific variation of IRS Form 1099 that is used to report various types of miscellaneous income not covered by other 1099 forms. It is only used for payments made in the normal course of a trade or business.

IRS Form 1099-MISC

Box Description

Box 1

Rents

Box 2

Royalties

Box 3

Other Income

Box 4

Federal income tax withheld

Box 5

Fishing boat proceeds

Box 6

Medical and health care payments

Box 7

Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale

Box 8

Substitute payments in lieu of dividends or interest

Box 9

Crop insurance proceeds

Box 10

Gross proceeds paid to an attorney

Box 12

Section 409A deferrals

Box 13

Excess golden parachute payments

Box 14

Nonqualified deferred compensation

Box 15

State tax withheld

Box 16

State/Payer's state no.

Box 17

State income

Let's take a look at what types of income the boxes on Form 1099-MISC cover.

Box 1 - Rents

The most common use for the rents box is the payment for the rent of office space. However, you do not report rent payments if they were made to a property manager or a real estate agent. Rent would only be reported if paid directly to the property owner.

Another type of rent is the cost of renting machines on a temporary basis as part of your business activities. For example, if you're a contractor and lease a bulldozer for grading a parking lot, then you are leasing the equipment for your business and would file a Form 1099-MISC. On the other hand, if you hire a backhoe and operator to excavate for a pool in your backyard, you would not file a 1099.

Rent for use of farmland for grazing is another example of income that would be reported in this box.

Box 2 - Royalties

Royalty payments of at least ​$10​ from investments in oil, gas and other mineral properties are reported in 1099-MISC Box 2. This box would also record royalty payments from intangible properties such as patents, trademarks, trade names and copyrights.

Form 1099 MISC is a specific variation of IRS Form 1099 that is used to report various types of miscellaneous income not covered by other 1099 forms.

Box 3 - Other income

The other income box is used for income over ​$600​ that is not reported in one of the other boxes. A few examples are:

  • Fair market value of prizes and merchandise won on game shows
  • Compensation paid to H-2A visa agricultural workers without valid TINs
  • Punitive damages awarded for physical and nonphysical injuries or sickness
  • Payments to participants in medical research studies

Box 4 - Federal income tax withheld

If you have made payments reported in boxes 1, 2, 3, 5, 6, 8, 9 or 10 to someone who has not given you a TIN, you are required to enter the amount for backup withholding in Box 4, even for amounts less than ​$600.

Box 5 - Fishing boat proceeds

For fishing boats with fewer than 10 crew members, Box 5 is for each individual’s share at fair market value from the sale of a catch. This box would also include any cash payments up to ​$100​ per trip made contingent on the terms of a minimum catch.

Box 6 - Medical and health care payments

Enter payments made to physicians or other suppliers of other health services in the course of your trade or business. Also, record payments made by insurance companies per health and accident programs.

Box 7 - Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale

This box only gets an “X” if you made sales of $5,000 or more in consumer products to another person, not a permanent retail establishment, on a commission basis or a buy-sell agreement for resale. This box does not require a dollar amount. You can send the details of these sales to the recipient in a letter along with any commission or awards.

Box 8 - Substitute payments in lieu of dividends or interest

These are payments of ​$10​ or more made to a broker on behalf of a customer instead of dividends or tax-exempt interest arising from a loan of the customer’s securities.

Box 9 - Crop insurance proceeds

The amount that an insurance company pays to a farmer as a result of crop damage is entered in Box 9.

Box 10 - Gross proceeds paid to an attorney

These are payments made to attorneys from the gross proceeds of a settlement agreement, such as the awards from a lawsuit or an insurance company making a payment as settlement of a claim. These do not include payments to attorneys for legal services provided in the normal course of business transactions.

Box 11 -

Left blank

Box 12 - Section 409A deferrals

Entries in this box are guided by IRS Notice 2008-115 Reporting and Wage Withholding Under Internal Revenue Code #409A.

Box 13 - Excess golden parachute payments

Record excess golden parachute payments. Excess is defined as the amount over an individual’s average annual compensation recorded as gross income for the most recent five tax years. See IRS Regulations section 1.409A-1 for more details.

Box 14 - Nonqualified deferred compensation

Enter any deferred amounts that should be included in income per section 409A because the nonqualified deferred compensation plan does not meet the requirements of section 409A. For more information, see IRS Regulations sections 1.409A-1 through 1.409A-6, Notice 2008-113.

Boxes 15 - 17

These boxes report state taxes withheld, your state identification number and the amount of income earned in the state.

Generally, Form 1099-MISC is used to report payments over ​$600to a specific payee. The exceptions to this requirement are as follows:

  • Box 2 - Royalties - Report any amounts over ​$10​.
  • Box 4 - Backup withholding - Report all withholding regardless of the amount.
  • Box 9 - Direct sales - This box does not require a dollar entry, only and “X.”
  • Box 13 - Excess golden parachute payments - Record any amount over an individual’s average over the past five years.

The IRS recently redesigned form 1099-MISC. For tax years beginning in 2020, the reporting of nonemployee compensation, such as independent contractors, has been removed from Form 1099 - MISC and will be reported on a new Form 1099-NEC (non-employee compensation).

The deadline for filing Form 1099-MISC is ​Feb. 28​ of the year after the tax year. There is also IRS Form 1099-NEC for independent contractors.