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Back to School Basics – Form 1099 MISC

Learn the basics of Form 1099-MISC, from recipients to filing requirements, with line-by-line details and commonly reported income types. This form helps track income for non-employee compensation and various payments.

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Back to School Basics – Form 1099 MISC

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  1. Back to School Basics – Form 1099 MISC Welcome

  2. Back to School Basics - Form 1099 MISC Agenda Purpose of Form 1099 MISC Typical Recipients Overview – Line by Line Detail Filing Requirements

  3. Purpose of Form 1099 MISC A record of income received from a business for services rendered Cost-cutting alternative for companies needing specific tasks completed Non-employee compensation means no company paid taxes No need to provide benefits or offer employee incentives No risk of investment loss to the company Typically the relationship can be ended once the task is completed

  4. Form 1099 MISC Recipients Independent Contractor or “freelancer” Actors, novelists, freelance writers and other creative artists Also used to report income from the following : At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest Gross proceeds of $600 or more paid to an attorney Fishing boat proceeds $600 or more in Rents, services, prizes and awards

  5. Form 1099 MISC Recipients $600 or more in medical and health care payments, crop insurance proceeds, cash payments for fish $600 or more in cash paid from a national principal contract to an individual, partnership, or estate $600 or more in other income payments direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

  6. Overview – Line By Line Detail Payroll departments usually handle the “other income” payments and nonemployee compensation • Audience Poll – Does your business hire Independent Contractors?

  7. Overview – Line By Line Detail Payer’s Information Identification Numbers Recipient’s Information Account Information 2nd TIN Not

  8. Overview – Line By Line Detail Box 1 – Rents Box 2 – Royalties Box 3 – Other Income Prizes and awards FMV of merchandise from game showsor sweepstakes Punitive Damages Compensatory damages for non-physical injuries or sickness Damages received for emotional distress Physical symptoms from emotional distress reportable Damages received due to emotional distress from physical injuries or sickness NOT reportable

  9. Overview – Line By Line Detail Payments of a deceased employee’s wages Estate or Beneficiary Payments of Indian gaming profits or to Tribal Members Termination payments to self-employed insurance salespeople Box 4 – Federal Income Tax Withheld Backup Withholding Box 5 – Fishing Boat Proceeds

  10. Overview – Line By Line Detail Box 6 – Medical and Health Care Payments $600 or more to physicians and medical/health care service providers Includes payments made by medical and health care insurers under health, accident and sickness insurance programs No requirement to report payments to pharmacies for prescription drugs *Corporation exemption applies when payments made to a health care provider are done through a credit or debit card in an FSA, HRA or HSA.

  11. Overview – Line By Line Detail Box 7 – Nonemployee Compensation $600 or more Fees, commissions, prizes and awards for services performed Expenses incurred for the use of an entertainment facility Federal executive agencies Conditional Guidelines Non employee payment Services in the course of the payer’s trade or business Individual or partnership $600 or more

  12. Overview – Line By Line Detail Box 7 common examples Professional Service Fees Referral Fees Fees and travel reimbursement not accounted to the payer if the fee and reimbursement total is at least $600 or more Non-employee entertainers for services Taxable Fringe Benefits to nonemployees Directors fees Nonqualified deferred compensation (409A)

  13. Overview – Line By Line Detail Box 8 – Substitute Payments in Lieu of Dividends or Interest Definition of “Substitute Payment” means a payment in lieu of: Tax-exempt interest that has accrued while a short sale was open and A dividend if the ex-dividend date is after the transfer of stock for use in a short sale and before the closing of the short sale

  14. Overview – Line By Line Detail Box 9 – Payer Made Direct Sales of $5,000 or More of Consumer Products to a Buyer (Recipient) for Resale Enter X if applicable Do not enter a dollar amount Box 10 – Crop Insurance Proceeds Boxes 11 and 12 – Foreign Tax Paid and Foreign Country or US Possession (For 2013) Box 13 – Excess Golden Parachute Payments Box 14 – Gross Proceeds Paid to an Attorney

  15. Overview – Line By Line Detail Box 15a – Section 409A Deferrals Box 15b – Section 409A Income Amounts considered subject to a substantial risk of forfeiture are not included Also reported in Box 7 Box 16 – State Income Tax Withheld Box 17 – State/Payer’s State Number Box 18 State Income

  16. Filing Requirements TIN (Tax Identification Number) What is a TIN When is a TIN required Missing or Incorrect TIN Not provided Less than 9 digits Mixture of digits and numbers

  17. Filing Requirements IRS 1099 TIN Matching Process TIN’s are matched against two files: All SSN’s issued by the SSA All IRS assigned employer identification numbers (EINs) CP2100/2100A Notice “B” Notice Incorrectly Reported TIN by the payee Correct the data in the system, do not send B Notice

  18. Filing Requirements Provided TIN and Name Control do not match Send B Notice to payee Procedure when a TIN is not Provided Backup Withholding @ 28% W-9 Report withholding on Form 945- Annual Return of Federal Income Tax Withheld

  19. Filing Requirements When to File 1099 MISC Reporting Period February 28th of the following Tax Year Form 1096 Must be properly addressed and mailed by the due date to be considered timely Holidays and Weekend due dates

  20. Filing Requirements Electronic Reporting Automatic Extension of 1 month Must be reported via Filing Information Returns Electronically (FIRE) system 250 or more forms Recordkeeping Requirement 3 years from the due date of the returns 4 years from the due date of the returns if backup withholding was imposed

  21. Filing Requirements **Electronic filing is not accepted on Magnetic Media for 1099 MISC Returns** https://fire.irs.gov Test files can be submitted in advance to http://fire.test.irs.gov

  22. References http://www.irs.gov/pub/irs-pdf/i1099msc.pdf - Instructions for Filing Forms 1099 MISC http://www.irs.gov/pub/irs-pdf/f1099msc.pdf - Form 1099 MISC http://www.irs.gov/pub/irs-pdf/p1220_11.pdf - Publication 1220, Specifications for Filing Forms 1099 electronically

  23. Thank You Thank you for attending! Jillian Robinson, CPP PenSoft (757) 873-1199 jrobinson@pensoft.com

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