In 2011, there was no separate Form 1099-NEC. Nonemployee compensation was reported in Box 7 of Form 1099-MISC. Form 1099-NEC wasn't reintroduced until tax year 2020.

Form 1099-MISC was the IRS information return used in 2011 to report various types of miscellaneous income, including payments to independent contractors and other nonemployees. Specifically, Box 7 of Form 1099-MISC was designated for "Nonemployee Compensation"—money paid to individuals who performed services for your business but weren't your employees.

If you ran a business in 2011 and paid an independent contractor, freelancer, consultant, or other nonemployee $600 or more during the year for services, you were required to report those payments. This applied whether you hired a graphic designer for a one-time project, paid a bookkeeper monthly fees, or contracted with a construction worker. The form served two critical purposes: it told the IRS about the payment so they could verify the recipient reported the income, and it provided the recipient with documentation they needed to file their own tax return.

The form was filed with the IRS and a copy was given to the person who received the payment. For the payer (the business), it was simply an information return—no tax was due with the form itself. For the recipient (the contractor), the amount in Box 7 represented self-employment income that typically needed to be reported on Schedule C or Schedule F of their Form 1040, and was generally subject to self-employment tax.

When You’d Use Form 1099-MISC (Late or Amended Filing)

The standard deadline for filing Form 1099-MISC with the IRS for tax year 2011 was February 28, 2012 (or April 2, 2012, if filing electronically). Recipients had to receive their copies by January 31, 2012. But what if you missed these deadlines or discovered an error after filing?

Late Filing: If you failed to file by the deadline, you should file as soon as possible to minimize penalties. The IRS assessed penalties based on how late the filing was. In 2011, penalties ranged from $30 to $100 per form depending on how many days late you filed, with maximum annual penalties for small businesses. Even if you were years late, filing was still better than not filing at all, as penalties and interest continued to accrue.

Amended/Corrected Returns: If you discovered an error on a Form 1099-MISC you already filed—whether you reported the wrong amount, used an incorrect taxpayer identification number (TIN), or sent the form to the wrong person—you needed to file a corrected form. To do this, you would prepare a new Form 1099-MISC with the correct information and check the "CORRECTED" box at the top of the form. You then filed this corrected form with the IRS and sent a copy to the recipient. The corrected form replaced the original entirely, so you reported the complete correct information, not just the changes.

If you needed to delete a form entirely (perhaps because you filed one for someone you shouldn't have), you would prepare a Form 1099-MISC with the recipient's information, check the "VOID" box, and enter all zeros in the money boxes. There was no specific deadline for corrections—you could file them whenever you discovered the error—but prompt correction helped avoid confusion during tax season.

Key Rules or Details for 2011

Several specific rules governed Form 1099-MISC reporting for nonemployee compensation in 2011:

The $600 Threshold: You only had to file if you paid $600 or more to a single nonemployee during the calendar year for services. Payments below this amount didn't require reporting, though they were still taxable to the recipient.

Trade or Business Requirement: The payments had to be made in the course of your trade or business. Personal payments—like paying your neighbor to mow your lawn at your home—were not reportable. However, nonprofit organizations, government agencies, and even qualified pension plans were considered engaged in a trade or business and had to file.

Who Was Reportable: You generally reported payments to individuals, partnerships, estates, and sometimes corporations. However, most payments to corporations were exempt from reporting, with important exceptions: medical and health care payments, attorneys' fees, gross proceeds paid to attorneys, and fish purchases for cash all had to be reported even if paid to corporations.

Employee vs. Independent Contractor: This distinction was crucial. If someone was your employee, you reported their compensation on Form W-2, not Form 1099-MISC. The IRS used common-law rules to determine worker status, examining factors like behavioral control, financial control, and the relationship between the parties. Generally, if you controlled how and when the work was done, the worker was likely an employee. If they controlled their own methods and could profit or lose based on their business decisions, they were likely independent contractors. Getting this wrong could result in significant penalties and back taxes.

Backup Withholding: If a contractor failed to provide you with their taxpayer identification number (TIN) or the IRS notified you that the TIN was incorrect, you were required to withhold 28% of payments as backup withholding and report this in Box 4 of Form 1099-MISC.

Electronic Filing Threshold: If you filed 10 or more information returns (including all 1099 forms, W-2s, etc.), you were required to file electronically. Smaller filers could submit paper forms.

Payment Card Exemption: A new rule in 2011 stated that if you paid via credit card, debit card, or third-party payment networks like PayPal, those payments didn't need to be reported on Form 1099-MISC because they were reported on the new Form 1099-K by the payment processor instead.

Step-by-Step (High Level)

Steps 1–7

Step 1: Gather Information Throughout the Year

At the beginning of any business relationship with a contractor, have them complete Form W-9 (Request for Taxpayer Identification Number and Certification). This form provides their legal name, business name (if any), address, and TIN (Social Security number or Employer Identification Number). Keep these on file. Track all payments made to each contractor during the calendar year.

Step 2: Determine Who Needs a Form

After year-end, review your records and identify everyone who received $600 or more for services. Remember: only services, not merchandise or product purchases. Check that they aren't corporations (unless they fall into exception categories). Verify you didn't pay them exclusively via payment cards.

Step 3: Obtain the Correct Forms

Order official IRS Form 1099-MISC (the red-ink scannable version) by calling 1-800-TAX-FORM or downloading from IRS.gov. Note that for paper filing with the IRS, you couldn't use forms printed from your home printer—the IRS needed the official scannable Copy A. Recipient copies could be printed.

Step 4: Complete Each Form

Fill out a separate Form 1099-MISC for each recipient. In the payer section, enter your business information and EIN. In the recipient section, enter the contractor's information from their W-9. In Box 7 (Nonemployee Compensation), enter the total amount paid during 2011. Complete Box 4 if you withheld any backup withholding. If applicable, complete state tax information in Boxes 16-18.

Step 5: Distribute Copies

By January 31, 2012, provide Copy B and Copy 2 to each recipient. You could mail them or deliver them in person. Keep Copy C for your records.

Step 6: File With the IRS

Prepare Form 1096 (Annual Summary and Transmittal of U.S. Information Returns), which served as a cover sheet summarizing all your 1099-MISC forms. Attach Copy A of all Forms 1099-MISC to Form 1096 and mail them to the IRS address listed in the instructions (the address varied by your location). This package had to be postmarked by February 28, 2012, for paper filing or submitted by April 2, 2012, if filing electronically.

Step 7: Maintain Records

Keep copies of all forms and supporting documentation for at least three years, though four years was recommended in case of IRS inquiries.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Employees as Independent Contractors

This was the most costly error. Businesses sometimes classified workers as contractors to avoid payroll taxes, but the IRS scrutinized these relationships. How to avoid it: Use IRS Publication 15-A guidelines to properly determine worker status. When in doubt, consult a tax professional. If you provided detailed instructions, set the worker's schedule, provided tools and supplies, and paid by the hour or week, the person was likely an employee.

Mistake #2: Using Incorrect or Missing Taxpayer Identification Numbers

Filing with an incorrect TIN triggered IRS "B" notices and potential penalties for both you and the recipient. How to avoid it: Always collect Form W-9 before making the first payment. Never accept a contractor's word for their SSN—have them write it on Form W-9. Consider using the IRS TIN Matching Service to verify TINs before filing.

Mistake #3: Forgetting to File for Corporations That Require Reporting

While most corporate payments were exempt, the exceptions tripped up many filers. Attorneys' fees paid to law firms (even if incorporated) had to be reported. How to avoid it: Create a checklist of exception categories: attorneys, medical providers, and federal contract vendors all required reporting regardless of corporate status.

Mistake #4: Missing the Filing Deadline

Late filing resulted in penalties even if the recipient properly reported their income. How to avoid it: Mark your calendar with the January 31 recipient deadline and the February 28 (or April 2 for e-filing) IRS deadline. Start the process in early January, not late January. Consider electronic filing for the extended deadline.

Mistake #5: Reporting Reimbursements or Non-Service Payments

Some businesses incorrectly included expense reimbursements or payments for merchandise. How to avoid it: Only report payments for services. If you paid a contractor $5,000 for services plus reimbursed $500 for materials they purchased, you only reported the $5,000 (unless the materials were incidental to the service).

Mistake #6: Double-Reporting Payment Card Transactions

With the new Form 1099-K rules in 2011, paying by credit card meant the payment processor reported the transaction, so you shouldn't have. How to avoid it: Review your payment methods. If you paid exclusively by credit card or PayPal, you likely didn't need to file Form 1099-MISC for that contractor.

Mistake #7: Not Filing Because the Amount Was "Close" to $600

Some businesses assumed $599 didn't need reporting. While technically true, if you later discovered you actually paid $600 or more (perhaps an invoice was missed), you'd need to file late. How to avoid it: Keep meticulous records throughout the year and review them carefully at year-end.

What Happens After You File

For the Payer (Your Business)

Once you filed, the IRS processed the forms and matched them against the recipients' tax returns. If you filed correctly and on time, you typically wouldn't hear anything. The forms served as your documentation that you properly reported the payments, which meant you could confidently deduct them as business expenses on your tax return (Schedule C, Form 1120, etc.).

If there were problems—incorrect TINs, missing forms, or discrepancies—you might receive IRS notices. The most common was the "CP2100 Notice" or "B Notice," informing you that a TIN didn't match IRS records. You'd then need to contact the recipient to resolve the issue and potentially file backup withholding in the future if the problem persisted.

For the Recipient (The Contractor)

The contractor received Copy B by January 31, 2012, and used it to prepare their tax return. The amount in Box 7 was reported as self-employment income, typically on Schedule C (Profit or Loss from Business) or Schedule F (Profit or Loss from Farming) of Form 1040. This income was subject to both regular income tax and self-employment tax (Social Security and Medicare tax for self-employed individuals), which added approximately 15.3% in additional tax on top of regular income tax rates.

The IRS's computers matched the 1099-MISC forms filed by payers against income reported on contractors' tax returns. If a contractor failed to report income that appeared on a 1099-MISC, the IRS would send a matching notice (CP2000), proposing additional tax, interest, and penalties. This automated matching process meant contractors couldn't simply ignore their 1099-MISC income.

Potential Audits and Penalties

For payers who failed to file or filed late, the IRS could assess penalties ranging from $30 to $100 per form in 2011, depending on how late the filing was. Intentional disregard could result in penalties of at least $250 per form with no maximum. Additionally, incorrect employee classification could trigger employment tax audits, resulting in substantial back taxes, penalties, and interest covering payroll taxes that should have been withheld.

For recipients who didn't report 1099-MISC income, the IRS could assess accuracy-related penalties (20% of the underpayment) if the omission was deemed negligent, or civil fraud penalties (75%) in egregious cases. Interest accrued on all unpaid taxes from the original due date of the return.

FAQs

Q1: I paid a contractor exactly $600. Do I need to file Form 1099-MISC?

Yes. The threshold is "$600 or more," so $600.00 exactly requires filing. Only amounts less than $600 are exempt from reporting.

Q2: The contractor I hired is an LLC. Do I need to report the payment?

It depends on how the LLC is taxed. If it's a single-member LLC taxed as a sole proprietorship, yes, you must file Form 1099-MISC. If it's taxed as a corporation (C-corp or S-corp), you generally don't need to file, unless it's for attorneys' fees or medical services. When collecting Form W-9, the contractor should indicate their tax classification.

Q3: I paid a contractor $1,200, but $800 was for services and $400 was reimbursement for materials they bought. What amount do I report?

Report the full $1,200 if the materials were incidental to providing the service. For example, if you hired a painter and they bought the paint as part of their painting service, report the entire payment. However, if you separately purchased merchandise from the contractor, only report the service portion.

Q4: What if the contractor refuses to provide their Social Security number or complete Form W-9?

You are required to request the information. If they refuse, you must begin backup withholding at 28% on all future payments. You should still file Form 1099-MISC showing the total payments and the amount withheld in Box 4. The contractor may also face IRS penalties for failure to provide their TIN.

Q5: I discovered I forgot to file a Form 1099-MISC for 2011. It's now 2013. Should I still file it?

Yes, file it as soon as possible. Use the 2011 form (not a current-year form) and include a cover letter explaining the late filing. While you'll likely face late-filing penalties, filing late is better than never filing, and penalties may be reduced or waived if you show reasonable cause.

Q6: The contractor I hired only worked one day and I paid them $650 cash. Do I still need to report this?

Yes. The $600 threshold is per calendar year per person, regardless of whether it was one payment or multiple payments, one day or all year. The method of payment (cash, check, etc.) doesn't change the reporting requirement, though payments made by credit card or third-party networks like PayPal were exempt because they were reported on Form 1099-K.

Q7: Can I file Form 1099-MISC electronically, and what are the benefits?

Yes, and for 2011, if you had 10 or more information returns, electronic filing was mandatory. Benefits included an extended deadline (April 2, 2012, instead of February 28), immediate confirmation of receipt, fewer errors, and no need to mail paper forms. You needed approved software that met IRS specifications outlined in Publication 1220.

Sources

All information in this guide is based on official IRS documentation:

• 2011 Instructions for Form 1099-MISC (IRS.gov)
• 2011 Form 1099-MISC (IRS.gov)