There are many situations in which IRS form 1099-MISC (miscellaneous) is required to be issued. Luckily, a 1099-MISC should only be issued for payments that occur in the course of a trade or business.
One of the most common instances your business should issue a 1099-MISC is to report payments to independent contractors. Independent contractors are becoming more common, especially for small businesses. In most situations, you must report payments to an independent contractor in Box 7 (Nonemployee Compensation) of 1099-MISC.
The are various other situations in which your business would file a 1099-MISC with the IRS.
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- Rent payments over $600 (real estate, machinery, and agricultural)
- Royalties paid over $10 (oil, gas, mineral, and timber as well as intangible property such as copyrights, patents, and trademarks)
- Payments to law firms or attorneys over $600
- Medical and healthcare payments over $600 to each physician, medical corporation, or other supplier
- Nonemployee compensation over $600 (such as commissions paid to nonemployee salespeople, independent contractors, and other professional fees)
- Crop insurance proceeds paid over $600
- Other income (such as fair market value of game show prizes and sweepstake winnings)
There are several situations in which 1099-MISC is not issued:
- Payments for merchandise, telephone, freight, storage, and similar items.
- Wages to employees. These are reported on IRS form W-2.
- Cancellation of debt. This is reported on IRS form 1099-C.
- Generally, payments to a corporation; however, there are exceptions such as medical and health care payments, fish purchases for cash, and attorneys' fees.
This highlights the importance of having accurate bookkeeping records at your business. Your accountant can work with you to ensure your 1099-MISC filings go smoothly and accurately each year.
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Additional information:
Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved. You are responsible for consulting with your own professional tax advisors concerning specific tax circumstances for yourself or business. If you have questions regarding tax issues specifically related to your personal or business circumstances, you should consult with your own professional tax advisor, accountant, or attorney.