Form 1099-MISC Miscellaneous Income 2019: A Complete Guide

What the Form Is For

Form 1099-MISC (Miscellaneous Income) is an information return that businesses and organizations use to report various types of payments made during the tax year. If you run a business, work as a freelancer, own rental property, or make certain types of payments to others, this form plays a crucial role in tax reporting. IRS.gov

The form serves as a communication tool between payers (those making payments), recipients (those receiving payments), and the IRS. When you receive a 1099-MISC, it means someone paid you money that the government considers potentially taxable income. When you issue one, you're informing the IRS about payments you made in the course of your trade or business.

For the 2019 tax year, businesses must file Form 1099-MISC when they've paid at least $600 for services performed by non-employees (reported in Box 7 as nonemployee compensation), rents, prizes and awards, medical and health care payments, or certain other income types. The threshold drops to just $10 for royalty payments or broker payments in lieu of dividends or tax-exempt interest. The form also reports direct sales of at least $5,000 of consumer products for resale. 2019 Instructions for Form 1099-MISC

Importantly, Form 1099-MISC is only for business payments—personal payments don't need to be reported. If you paid your neighbor's teenager to mow your lawn, that's not reportable. But if you own a business and hired an independent contractor to handle your landscaping, you'd need to issue a 1099-MISC if you paid them $600 or more during the year.

When You'd Use This Form (Including Late and Amended Filings)

Original Filing Deadlines

For 2019, if you reported nonemployee compensation in Box 7, you had to file Form 1099-MISC with the IRS by January 31, 2020, whether filing on paper or electronically. This accelerated deadline was designed to help the IRS combat fraudulent tax refund claims. For all other types of payments, the deadline was February 28, 2020 for paper filing or March 31, 2020 for electronic filing. 2019 General Instructions for Certain Information Returns

Recipients must receive their copy (Copy B) by January 31, 2020 for most payments. However, if you only reported amounts in Box 8 (substitute payments in lieu of dividends or interest) or Box 14 (gross proceeds paid to an attorney), the recipient deadline was extended to February 18, 2020.

Late and Amended Filings

If you missed the original deadline, you should still file as soon as possible. The IRS assesses penalties based on how late the form is, but filing late is always better than not filing at all. Penalties increase the longer you wait: smaller penalties apply if you file within 30 days of the deadline, moderate penalties for 30 days to August 1, and higher penalties after August 1 or for not filing at all.

If you discover an error after filing—such as an incorrect payment amount, wrong taxpayer identification number (TIN), or wrong recipient name—you must file a corrected Form 1099-MISC. To correct a paper form, file a new Form 1099-MISC with the corrected information and check the "CORRECTED" box at the top. Do not check the "VOID" box, as this tells IRS scanning equipment to ignore the form entirely. For electronic corrections, follow the procedures outlined in IRS Publication 1220. You must also furnish a corrected statement to the recipient. 2019 Instructions for Form 1099-MISC

Key Rules and Requirements for 2019

Reporting Thresholds: You must file Form 1099-MISC if you paid $600 or more in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, or crop insurance proceeds. For royalties or broker payments in lieu of dividends, the threshold is only $10. Cash payments for fish purchases and fishing boat proceeds also have a $600 threshold. Additionally, you must report direct sales of $5,000 or more of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

Who Must Receive a 1099-MISC: Generally, you only report payments to individuals, partnerships, estates, and in some specific cases, corporations. Most payments to corporations are exempt from reporting. However, critical exceptions exist: you must report payments to corporations for medical and health care services (Box 6), attorneys' fees (Box 7), gross proceeds paid to attorneys (Box 14), fish purchases for cash (Box 7), and substitute payments in lieu of dividends or interest (Box 8). Federal executive agencies must also report payments to corporations for services.

The Corporate Exemption: This exemption means if you hire a corporation (including LLCs treated as C or S corporations) to perform most services, you typically don't need to issue a 1099-MISC. However, the exceptions listed above are significant and frequently overlooked.

Trade or Business Requirement: Form 1099-MISC reporting only applies to payments made in the course of your trade or business. This includes nonprofit organizations, trusts of qualified pension plans, tax-exempt organizations under section 501(c) or (d), farmers' cooperatives, and government agencies. Personal payments are never reportable on Form 1099-MISC.

Taxpayer Identification Numbers (TINs): You must obtain the recipient's correct TIN before filing. Use Form W-9 to request this information. If a recipient fails to provide their TIN, you may be required to backup withhold 24% of the payment and report that withholding in Box 4. Filing without a correct TIN can result in penalties for both you and the recipient. 2019 Instructions for Form 1099-MISC

Electronic Filing Requirements: If you file 250 or more information returns of any type during the calendar year, you must file electronically. This requirement applies across all Forms 1099, not just 1099-MISC.

Step-by-Step Filing Process (High Level)

Filing Form 1099-MISC involves several key steps that should be completed systematically:

Step 1: Determine Your Reporting Obligation
Review all payments made during 2019 to determine if you meet the reporting thresholds. Look at payments to independent contractors, service providers, landlords if you're a property manager, vendors, and anyone who performed services for your business. Remember that the $600 threshold applies per recipient for the entire year, not per transaction.

Step 2: Collect Taxpayer Information
Before year-end, obtain Form W-9 from everyone who might receive a 1099-MISC. The W-9 provides the recipient's legal name, business name (if applicable), TIN, address, and tax classification. Collecting this information early prevents delays and backup withholding requirements.

Step 3: Prepare the Forms
Complete Form 1099-MISC for each recipient. The form has multiple boxes for different payment types—ensure you report each payment in the correct box because the IRS uses this to verify proper income reporting. Common boxes include Box 1 (Rents), Box 2 (Royalties), Box 3 (Other Income), Box 6 (Medical and Health Care Payments), and Box 7 (Nonemployee Compensation). Enter the total amount paid during the year in the appropriate box(es).

Step 4: File with the IRS
Submit Copy A of Form 1099-MISC to the IRS along with Form 1096 (Annual Summary and Transmittal). Remember the critical deadline: January 31, 2020, if reporting Box 7 nonemployee compensation, or February 28/March 31, 2020, for other payments depending on filing method. If you're filing multiple 1099-MISC forms with Box 7 amounts after January 31, file them separately from forms without Box 7 amounts to avoid penalties.

Step 5: Furnish Statements to Recipients
Provide Copy B to each recipient by January 31, 2020 (or February 18, 2020, for Box 8 or 14 only). Recipients need this information to prepare their tax returns. You can furnish statements electronically if recipients consent. 2019 Instructions for Form 1099-MISC

Step 6: Maintain Records
Keep Copy C and all supporting documentation for at least three years. This includes contracts, invoices, payment records, and completed W-9 forms.

Common Mistakes and How to Avoid Them

Mistake #1: Missing the January 31 Deadline for Box 7 Many businesses miss the accelerated deadline for nonemployee compensation. Unlike other 1099-MISC boxes, Box 7 has a January 31 deadline for both filing with the IRS and furnishing to recipients. Mark your calendar clearly and don't assume all 1099 forms have the same deadline.

Mistake #2: Reporting Payments in the Wrong Box Each box on Form 1099-MISC serves a specific purpose, and the IRS matches recipient reporting to the box number. A common error is reporting independent contractor payments in Box 3 instead of Box 7. Box 7 is specifically for nonemployee compensation—services performed by someone who isn't your employee. Box 3 is for "other income" like prizes, awards, or certain damages. Using the wrong box can trigger IRS notices for both you and the recipient.

Mistake #3: Failing to Report Payments to Attorneys and Medical Providers Remember that the corporate exemption doesn't apply to legal services or medical/health care services. Even if you paid a law firm or a medical professional corporation, you must still file Form 1099-MISC. This exemption catches many businesses off guard.

Mistake #4: Incorrect or Missing Taxpayer Identification Numbers Filing with an incorrect or missing TIN is one of the most common—and most penalized—mistakes. Always obtain Form W-9 before making payments or at least before year-end. If a recipient refuses to provide their TIN, you're required to backup withhold 24% from their payments. Double-check that TINs are formatted correctly: Social Security Numbers should be XXX-XX-XXXX, and Employer Identification Numbers should be XX-XXXXXXX.

Mistake #5: Forgetting About Non-Cash Payments Form 1099-MISC isn't just for cash payments. If you provided property, services, or other non-cash compensation worth $600 or more as payment for services, you must report the fair market value. This includes bartering arrangements.

Mistake #6: Not Combining All Payments to One Recipient The $600 threshold applies to the total amount paid to one recipient during the year, not per transaction. If you paid a contractor $300 in June and $400 in November, the total is $700—you must file a 1099-MISC. Track payments by recipient throughout the year.

Mistake #7: Checking the VOID Box on Corrections When correcting a Form 1099-MISC that you've already filed, never check the VOID box. The VOID box tells IRS scanners to skip that form completely, so your correction won't be processed. Instead, check the CORRECTED box and enter the correct information. 2019 Instructions for Form 1099-MISC

Mistake #8: Confusing Employee vs. Independent Contractor Status If you incorrectly classify an employee as an independent contractor and issue them a 1099-MISC instead of a W-2, you may face serious consequences including owing employment taxes, penalties, and back wages. When in doubt about worker classification, review IRS guidelines or consult a tax professional.

What Happens After You File

IRS Processing and Matching: The IRS receives your Form 1099-MISC and enters the information into its computer systems. Throughout the year, the IRS matches the income you reported with the income shown on recipients' tax returns. If there's a discrepancy—for example, you reported paying someone $5,000 but they only reported $3,000 in income—the IRS may send the recipient a notice proposing additional tax, penalties, and interest.

Recipient Use: Recipients use Form 1099-MISC to prepare their tax returns. Amounts in Box 7 typically get reported on Schedule C (Profit or Loss from Business) if the recipient is self-employed, and they may owe self-employment tax on the income. Other boxes flow to different parts of the tax return depending on the payment type. Recipients are responsible for reporting all income, even if they don't receive a 1099-MISC, but the form helps them track and substantiate their income.

Potential IRS Notices: If you filed late, filed with incorrect information, or failed to file when required, the IRS may send you a penalty notice. Common notices include Notice 972CG (proposing penalties for information return violations) and CP2100/CP2100A (notices about missing or incorrect TINs). If you receive a notice, respond promptly. Many penalties can be abated if you have reasonable cause for the error. Information Return Penalties

Penalty Structure: Penalties for failing to file correct information returns vary based on when you correct the error. For 2019, penalties ranged from $50 to $270 per form depending on how late the filing was, with higher penalties for intentional disregard. Maximum penalties apply per year. Small businesses with average annual gross receipts of $5 million or less face lower maximum penalties.

Your Records: Keep your copies of all Forms 1099-MISC filed (Copy C) along with supporting documentation for at least three years from the filing date. If the IRS questions your reporting, these records prove you fulfilled your filing obligations.

FAQs

Q1: Do I need to file a 1099-MISC if I paid someone exactly $600, or does it have to be more than $600?

A: You must file if you paid $600 or more. The threshold is not "more than" but "at least" $600. So a payment of exactly $600.00 requires a Form 1099-MISC.

Q2: I paid a corporation for general services. Do I need to issue them a 1099-MISC?

A: Generally, no. Payments to corporations are exempt from 1099-MISC reporting with important exceptions: medical and health care services, attorneys' fees, gross proceeds paid to attorneys, fish purchases for cash, and substitute payments in lieu of dividends or interest. If your payment falls into one of these categories, you must file even if the recipient is a corporation.

Q3: What's the difference between Box 7 (Nonemployee Compensation) and Box 3 (Other Income)?

A: Box 7 reports payments for services performed by someone who is not your employee—independent contractors, freelancers, consultants. This income is subject to self-employment tax for the recipient. Box 3 reports other types of income not covered by other boxes, such as prizes and awards not for services, certain damages, Indian gaming profits, or payments to deceased employees' estates. Understanding this distinction is critical because the IRS treats these income types differently.

Q4: The contractor I hired is an LLC. Do I issue them a 1099-MISC?

A: It depends on how the LLC is taxed. If the LLC is a single-member LLC taxed as a sole proprietorship or a partnership, yes, you must issue a 1099-MISC. If the LLC is taxed as a C or S corporation, you generally don't need to issue one (except for the categories mentioned in Q2). The Form W-9 the LLC provides should indicate their tax classification.

Q5: I didn't get a Form W-9 from a contractor before paying them. What do I do now?

A: Request Form W-9 immediately. If the contractor refuses to provide their TIN or provides an incorrect one, you must start backup withholding at 24% on future payments. For payments already made without backup withholding, you still must file Form 1099-MISC using the information you have (name and address at minimum), though you may face penalties for missing TIN. The contractor may also face penalties for failing to provide their TIN.

Q6: I made a mistake on a 1099-MISC I already filed. How do I correct it?

A: File a corrected Form 1099-MISC as soon as you discover the error. Check the "CORRECTED" box at the top of the form (not the VOID box), enter the correct information in all fields, and file it with the IRS. Also provide a corrected copy to the recipient. The sooner you correct the error, the better chance you have of avoiding or reducing penalties.

Q7: Can I file Form 1099-MISC electronically, and are there any advantages to doing so?

A: Yes, you can file electronically through the IRS FIRE (Filing Information Returns Electronically) system or through approved third-party software. Electronic filing is required if you file 250 or more information returns during the year. Even if you're not required to e-file, there are advantages: you get an extended deadline (March 31 instead of February 28 for non-Box 7 payments), immediate confirmation of receipt, reduced error rates, and it's often easier than managing paper forms. 2019 General Instructions for Certain Information Returns

This guide is for informational purposes based on IRS publications for the 2019 tax year. Tax situations vary, and you should consult the official IRS instructions or a tax professional for guidance specific to your circumstances.

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