What Form 1099-MISC (2018) Is For
IRS Form 1099-MISC (2018) is used by businesses and organizations to report payments made to individuals who are not employees. It covers income such as rents, royalty payments, prizes and awards, crop insurance proceeds, fishing boat proceeds, and other compensation paid to an independent contractor or self-employed person. The form serves as an information return, helping the IRS verify that all miscellaneous income received during the calendar year is reported correctly on each taxpayer’s return.
Businesses must file Form 1099-MISC when they pay $600 or more for services performed in the course of a trade or business. Payments reported on this form do not include wages or employment tax withheld under the employer-employee relationship. Each payer is required to collect a valid taxpayer identification number (SSN or ITIN) from recipients using Form W-9 to ensure the correct amounts are reported to the IRS and the Social Security Administration.
When You’d Use Form 1099-MISC (2018)
Form 1099-MISC applies when a business pays an individual or company that is not treated as an employee. Typical examples include compensation paid to contractors, rent for office space, and gross royalties of $10 or more per year. The payer must file the form with the IRS and furnish a copy to the recipient by January 31 of the year following the year the payments were made.
If the form includes nonemployee compensation in Box 7, the payment must be filed earlier to comply with IRS deadlines. Starting in later years, nonemployee compensation was moved to Form 1099-NEC, but for 2018, it remained on Form 1099-MISC. Payers who fail to file or report payments correctly may face income tax penalties; therefore, it is essential to verify the amounts reported and ensure that the correct information is sent to the right individuals and businesses.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Key Rules or Details for 2018
For tax year 2018, Form 1099-MISC required businesses to report payments of $600 or more made in the course of a trade or industry to nonemployees. Payments, such as rents, other services, and compensation, were entered in specific boxes to ensure proper tax treatment. Gross royalties of $10 or more and federal income tax withheld under backup withholding also had to be included.
Corporate payments were generally exempt, but exceptions applied for attorney fees, medical services, and other reportable payments. Each payer was required to file a separate Form 1096 summarizing the total forms submitted. The amounts reported on these information returns helped the IRS match records with individual tax returns and identify underreported income.
Step-by-Step (High Level)
Step 1: Collect Taxpayer Information Early
Each payer must obtain a completed Form W-9 from every person or company paid $600 or more during the calendar year. This form provides a Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) to ensure payments reported on IRS Form 1099-MISC 2018 match IRS and Social Security Administration records.
Step 2: Track All Reportable Payments
Businesses should record all reportable payments, such as rents, royalty payments, and compensation paid to independent contractors. Accurate tracking helps ensure all miscellaneous income is correctly reported to the IRS.
Step 3: Obtain and Complete the Correct Form
Payers must use the official scannable Copy A of Form 1099-MISC for the IRS and provide Copy B to recipients. Each box must display the correct payment type—rents, services, or gross royalties—filed by January 31 of the year following the year payments were made.
Step 4: Prepare and Submit Form 1096
Form 1096 summarizes all 1099-MISC forms filed with the IRS, listing totals and counts for the calendar year. A separate Form 1096 must accompany each type of information return.
Step 5: Retain Copies for Records
Employers and payers must retain copies of filed forms and payment records for a minimum of three years. These records help answer any future IRS questions or resolve discrepancies in reported income.
For more information about IRS assistance, including help with your tax questions and payment options, see this comprehensive guide.
Common Mistakes and How to Avoid Them
- Reporting nonemployee compensation in the wrong box: Always report nonemployee compensation in the correct box to ensure proper self-employment tax calculation and avoid mismatched reporting.
- Using incorrect taxpayer identification numbers: Verify all SSNs or ITINs before submission. Inaccurate or missing TINs can trigger IRS notices and backup withholding penalties.
- Failing to File for Independent Contractors: Understanding the Difference Between Employees and Contractors. Always issue Form 1099-MISC for eligible nonemployees to maintain compliance. Learn more about common business tax problems to avoid potential penalties.
- Checking the wrong correction box: Use the “CORRECTED” box, not the “VOID” box, when fixing an error. Marking “VOID” removes the record from processing entirely.
- Forgetting corporate exceptions: Some payments to corporations, like those for medical or legal services, must still be reported. Review IRS exceptions before filing.
To avoid these issues, verify taxpayer information using the IRS TIN Matching program, maintain accurate records, and carefully review every box before submitting Form 1099-MISC.
What Happens After You File
After filing, the IRS processes Form 1099-MISC through its information matching system, comparing payments reported by payers with income reported by recipients. If the reported amounts align, no further action is required. If discrepancies occur, the IRS may issue notices requesting verification or correction of the information.
Recipients use the information provided to complete their tax return. Independent contractors and self-employed individuals report income from Box 7 on Schedule C, while royalty payments are generally reported on Schedule E. The IRS and the Social Security Administration use the data to track taxable income and verify that federal income tax obligations are met for each person or business involved.
FAQs
Who is required to file IRS Form 1099-MISC 2018?
Every business or payer that made reportable payments of $600 or more during the calendar year to an independent contractor or self-employed person must file Form 1099-MISC with the IRS and provide a copy to the recipient.
What income types must be reported on Form 1099-MISC?
Form 1099-MISC is used to report payments such as rents, royalty payments, crop insurance proceeds, fishing boat proceeds, prizes and awards, and other services performed by nonemployees in the course of a trade or business.
How does Form 1099-MISC differ from Form 1099-NEC?
Form 1099-MISC reports various types of miscellaneous income, whereas Form 1099-NEC is used explicitly for reporting compensation paid to independent contractors. In 2018, nonemployee compensation was still reported on Form 1099-MISC in Box 7.
What information is needed to complete Form 1099-MISC?
A payer must include the recipient’s name, address, taxpayer identification number (SSN or ITIN), and the total income amounts paid. Each payment type must be entered correctly in its designated box to ensure that all income and federal income tax data are reported accurately.
What happens after filing IRS Form 1099-MISC 2018?
After forms are filed, the IRS and Social Security Administration match payments reported by payers with income reported by individuals on their tax returns. If discrepancies occur, the IRS may contact the payer or recipient to verify the reported amounts.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
