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1099-MISC Tax Rules: Breaking Down the Form

Unsure about the 1099-MISC tax form? Justworks breaks it down for you.

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Justworks
Jan 22, 20203 minutes
Breaking down the 1099 tax forms.

What is a 1099 Tax Form?

The 1099 tax form reports any miscellaneous payments made by businesses to non-employee individuals during the past business year. While there are over a dozen different types of 1099s, we’ll focus on the common MISC version.

For Payors/Businesses:

1099-MISC Tax Form Requirements

The 1099 is a document that a business must send to a non-employee individual if:

  • Your business paid at least $600 to another individual for any reason during the past business year. That can include rent, goods and services, awards, medical and healthcare payments, payment for work, crop insurance proceeds and more.
  • Your company paid at least $10 in royalties or broker payments in place of dividends or tax-exempt interest.
  • There are any proceeds from fishing boats.
  • There are attorney services that grossed over $600.

If any of the above situations are true for you, then you are going to have to give a 1099-MISC to that business or individual.

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For Payees:

What Your 1099-MISC Includes

Before you even get to the 1099, make sure that you have provided a completed Form W-9 to the payor. The W-9 will include all your pertinent tax information: name, social security number or tax identification number and address.

At the end of each business year, businesses prepare a Form 1099-MISC with information from the Form W-9. You should receive the Form 1099-MISC by January 31st of each year it is reporting nonemployee compensation . The document is broken down into a few separate sections. The first section on the top left is the business' address and company name. You'll find your tax information from your W-9 directly beneath that. The rest of the Form 1099-MISC is reporting what income you received and whether any amounts were withheld from it.

What Does Each Box Mean?

Box 1: This box reports rental payments of at least $600 for an office space or equipment rentals.

Box 2: This box reports royalties in excess of $10.

Box 3: This box reports other types of payments which are not considered wages, like prizes or awards.

Box 4: This box reports the amount of federal income tax withheld.

Box 5: This box reports fishing boat proceeds.

Box 6: This box reports healthcare services made in the course of trade or business over $600.

Box 7: This is most likely the box that will have the most relevant information. Any nonemployee compensation, which includes money paid to you as an independent contractor, in excess of $600, will be reported in this box.

Box 8: This box reports substitute payments in lieu of dividends or interest.

Box 9: This box reports proceeds from the sales of consumer goods.

Box 10: This box will be populated if you’re a farmer that received crop insurance proceeds of $600 or more paid by an insurance company.

Box 11: This will be blank.

Box 12: This will be blank.

Box 13: This box reports any excess golden parachute payments subject to the 20% excise tax.

Box 14: This box reports gross proceeds totaling $600 or more paid to an attorney. For the most part, though, you’re likely to receive a 1099-MISC that has the nonemployee compensation (Box 7) filled out.

Justworks Can Help

Tax documents can be a hassle. Fortunately, Justworks can help. We prepare and file Forms 1099-MISC on behalf of our customers. We mail a copy of the Form 1099-MISC to contractors and vendors, and they can also find an electronic copy in their Justworks account.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.