What Is IRS Form 1099-MISC?

IRS Form 1099-MISC Explained

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Form 1099-MISC is an information return that businesses must issue to individuals and any contractors earning more than $600 in a year for goods and services. You will need to gather certain information about the individuals and businesses that contract with you to prepare Form 1099-MISC properly.

What Is IRS Form 1099-MISC?

IRS Form 1099-MISC is the way to report income that is performed by an independent contractor, which can be an individual or a company. In the case of an individual, the Social Security number can serve as the tax identifier. In the case of a business, you must use the firm's federal Employer Identification Number (EIN) as their tax identification. Your company must also have an EIN to issue any income and you can apply for one online based on the type of business entity you have established.

IRS Form 1099-MISC

Who Uses IRS Form 1099-MISC?

IRS Form 1099-MISC is used by any company that pays an individual contractor or freelancer or external company to conduct paid work in excess of $600 in any calendar year. It also must be issued to anyone who receives at least $600 in:

  • Rents
  • Prizes and awards
  • Medical and health care payments
  • Crop insurance proceeds
  • Cash payments for fish from someone who is a professional fisher

Other Forms of 1099-MISC

New in 2020 is Form 1099-NEC, which speeds up the dates for employers to report miscellaneous income as part of the PATH (Protecting Americans from Tax Hikes) Act to Jan. 31. There used to be a 30-day filing extension for any returns that carried non-employee compensation, which meant taxpayers would face a delay. This new form supplements the 1099-MISC for any non-employee income. It can be found online. 

Where to Get a Form 1099-MISC

The Form 1099-MISC can be downloaded from the IRS website. It also can be ordered for delivery by the U.S. Postal Service. However, during the COVID-19 crisis, as of June 2020, the IRS National Distribution Center is closed. If you use commercial tax software to complete your returns, Form 1099-MISC will be included.

How to Fill Out Tax Form 1099-MISC

You will need your contractors' Taxpayer Identification Numbers (TINs), if they have them. To protect yourself as a business owner, it is best practice to have all new contractors and businesses complete a W-9 form, “Request for Taxpayer Identification Number and Certification," to collect the information at the onset of the business relationship.

What to Do If You Don't Receive Form 1099-MISC

If you are a contract worker and do not receive Form 1099-MISC, contact the company you did the work for and ask them to reissue the document. The form does not have to be filed with your return the same way that a W2 is. However, it is important to total and report on your return all of the income that has been reported to the Internal Revenue Service (IRS) to avoid having your return flagged for audit.

Can Tax Form 1099-MISC Be E-Filed?

Tax Form 1099-MISC can be e-filed by the business that is the issuing agent and this is part of any commercial tax preparation software.

Where to Mail Tax Form 1099-MISC

You can submit Tax Form 1099-MISC to one of three regional IRS Centers: Austin, TX; Kansas City, MO; or Ogden, UT. The address to which you submit your 1099-MISC form depends on where your principal business, office or agency, or legal residence (in the case of an individual) is located in the United States.

Filing a Form 1099-MISC Without an EIN

If you are a sole proprietor and do not have an EIN, you are still required to complete the 1099-MISC with your Social Security Number, if you have contracted other entities and meet the filing threshold of paying $600 within a year. 

Penalties for Not Filing Form 1099-MISC

Small businesses with less than $5 million in gross receipts can be fined $50 per instance if filed within 30 days of the due date. If it's more than 30 days late but submitted by August 1, the penalty is $110 per entity. If it is later than August 1, the penalty increases to $270 per 1099-MISC; and completely disregarding the forms can result in fines of $550 per instance.

It's a good idea to review the 1099-MISC filing requirements with your tax professional prior to filing. The filing threshold is subject to change, so be sure you know what it is at the time that you are filing to ensure you are in compliance with this requirement.

Key Takeaways

  • Form 1099-MISC must be issued to any freelancer or contractor who receives $600 or more from a business.
  • Collect Tax ID information upfront from any individuals and contractors so your business can file these information forms on schedule.
  • Stiff penalties can be assessed for failing to file 1099-MISC.

Article Sources

  1. Internal Revenue Service. "About Form 1099-MISC, Miscellaneous Income." Accessed July 11, 2020.

  2. Internal Revenue Service. "2020 General Instructions for Certain Information Returns," Page 13. Accessed July 11, 2020.

  3. Internal Revenue Service. "Apply for an Employer Identification Number (EIN) Online." Accessed July 11, 2020.

  4. Internal Revenue Service. "2020 General Instructions for Certain Information Returns," Page 1. Accessed July 11, 2020.

  5. Internal Revenue Service. "Online Ordering for Information Returns and Employer Returns." Accessed July 11, 2020.

  6. Internal Revenue Service. "2020 General Instructions for Certain Information Returns," Page 7. Accessed July 11, 2020.

  7. Internal Revenue Service. "2020 General Instructions for Certain Information Returns," Page 14. Accessed July 11, 2020.

  8. Internal Revenue Service. "Increase in Information Return Penalties." Accessed July 11, 2020.