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.
Federal income tax withheld
Fishing boat proceeds
Medical and health care payments
Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale
Substitute payments in lieu of dividends or interest
Crop insurance proceeds
Gross proceeds paid to an attorney
Section 409A deferrals
Excess golden parachute payments
Nonqualified deferred compensation
State tax withheld
State/Payer's state no.
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.
Read More: What Happens if I Get a 1099 After I File My Taxes?
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 -
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 $600 to 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.
- Internal Revenue Service: Instructions for Forms 1099-MISC and 1099-NEC
- Internal Revenue Service: Am I Required to File a Form 1099 or Other Information Return?
- Nerdwallet: What Is an IRS Form 1099? How a 1099 Form Works & What to Do
- Turbotax: What Is an IRS 1099 Form?
- Internal Revenue Service: Reporting and Wage Withholding Under Internal Revenue Code § 409A
- Cornell Law School: § 1.280G-1 Golden Parachute Payments
- Internal Revenue Service: Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply With § 409A(a) in Operation
- Internal Revenue Service. "About Form 1099-MISC." Accessed Jan. 15, 2020.
- Internal Revenue Service. "Am I Required to File a Form 1099 or Other Information Return?" Accessed Jan. 15, 2020.
- Internal Revenue Service. "2019 Instructions for Form 1099-MISC," Page 1. Accessed Jan. 15, 2020.
- Internal revenue Service. "2019 Form 1099-MISC," Pages 1–2. Accessed Jan. 15, 2020.
- Internal revenue Service. "2019 Form 1099-MISC," Pages 1–7. Accessed Jan. 15, 2020.
- Internal Revenue Service. "Form 1099-MISC." Accessed Jan. 29, 2020.
- Internal Revenue Service. "Instructions for Forms 1099-MISC and 1099-NEC (2020)." Accessed Jan. 15, 2020.
- Internal Revenue Service. "2019 General Instructions for Certain Information Returns," Pages 25–27. Accessed Jan. 15, 2020.
James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.