In 2014, nonemployee compensation was reported on Form 1099-MISC in Box 7, not on Form 1099-NEC. The IRS reintroduced Form 1099-NEC in 2020, but this form didn't exist in 2014. This guide covers the 2014 requirements for reporting nonemployee compensation using Form 1099-MISC.

What the Form Is For

Form 1099-MISC is the IRS information return that businesses use to report various types of miscellaneous payments made during the year. In 2014, Box 7 of this form specifically captured ""nonemployee compensation""—payments made to independent contractors, freelancers, and other service providers who are not employees of your business.

Think of it as the IRS's way of tracking money flowing from businesses to workers who don't receive traditional W-2 wages. When you pay someone $600 or more for services in your trade or business, and that person isn't your employee, you generally need to report those payments in Box 7 of Form 1099-MISC. This includes payments to professionals like attorneys (for services), accountants, contractors, consultants, and others providing services to your business.

The form serves multiple purposes: it informs the IRS about these payments, helps the recipient (the independent contractor) know what income to report on their tax return, and creates a paper trail ensuring both parties are accountable for proper tax reporting. IRS 2014 Instructions for Form 1099-MISC

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

You must file Form 1099-MISC for the 2014 tax year if you made payments of $600 or more during 2014 to someone who is not your employee for services performed in your trade or business. This threshold applies to the total payments made throughout the calendar year to each individual or business entity.

Normal Filing Deadlines for 2014

• Recipient Copy (Copy B): Must be provided to the recipient by February 2, 2015 (since January 31, 2015 fell on a Saturday)
• IRS Filing (Copy A): Paper forms must be filed with the IRS by March 2, 2015; electronic filing deadline is March 31, 2015

Late or Amended Returns

If you missed these deadlines, you should still file as soon as possible. The IRS imposes penalties for late filing, but filing late is better than not filing at all. For 2014 forms filed late, penalties ranged from $30 to $100 per form depending on how late the filing occurred.

For amended returns, if you discover an error after filing, you should prepare a corrected Form 1099-MISC by checking the ""CORRECTED"" box at the top of the form. You must file the corrected form with the IRS and provide a corrected copy to the recipient. There's no specific deadline for corrections, but you should file them as soon as you discover the error to minimize potential penalties and confusion. IRS 2014 Instructions for Form 1099-MISC

Key Rules for 2014

Understanding the specific 2014 rules helps ensure proper compliance:

• The $600 Threshold Rule: You must report payments of $600 or more in total for the year to each nonemployee for services. This is cumulative—if you paid someone $200 three times during 2014, that's $600 total and requires reporting.
• Trade or Business Requirement: Form 1099-MISC is only required for payments made in the course of your trade or business. Personal payments don't count. Nonprofit organizations and government agencies are also considered to be engaged in trade or business for these purposes.
• Corporate Exception with Important Limits: Generally, you don't need to report payments to corporations. However, in 2014, this exception did NOT apply to payments for legal services or medical/health care services. Payments to attorneys and medical providers must be reported even if they operate as corporations.
• What Goes in Box 7: Nonemployee compensation includes fees, commissions, prizes and awards for services, payments to independent contractors, directors' fees, payments to lottery sales agents, and fish purchases for cash. It does NOT include employee wages (which go on Form W-2), payments for merchandise, rent paid directly to property owners, or payments to tax-exempt organizations.
• Taxpayer Identification Number (TIN) Requirements: You must obtain and verify the payee's TIN (usually their Social Security Number or Employer Identification Number) using Form W-9. Without a valid TIN, you may be required to backup withhold federal income tax at 28% on reportable payments.
• Self-Employment Tax Implications: Amounts reported in Box 7 are generally subject to self-employment tax for the recipient, meaning the independent contractor will likely owe both income tax and self-employment tax (Social Security and Medicare) on these payments. IRS 2014 Instructions for Form 1099-MISC

Step-by-Step Filing Process (High Level)

Step 1: Determine Who Needs a Form

Review all payments made during 2014. Identify anyone who received $600 or more for services who wasn't your employee. Exclude corporations (except attorneys and medical providers) and tax-exempt organizations.

Step 2: Collect Taxpayer Information

Before making payments (ideally), have each contractor complete Form W-9, which provides their legal name, business name (if applicable), address, and TIN. Keep these forms in your records; you don't file them with the IRS.

Step 3: Obtain the Correct Forms

Order official IRS Form 1099-MISC for 2014 or purchase IRS-approved substitute forms. You cannot file forms printed from the IRS website because they aren't scannable. You need Copy A (red/scannable for IRS), Copy B (for recipient), Copy C (for your records), and if applicable, state copies.

Step 4: Complete the Forms

Fill in your business information as the payer, the recipient's information, and enter the total amount paid in Box 7 (Nonemployee Compensation). Include any federal income tax withheld in Box 4 if you were required to backup withhold.

Step 5: Distribute Recipient Copies

Provide Copy B to each recipient by February 2, 2015. You can mail, hand-deliver, or with consent, provide electronically.

Step 6: File with the IRS

Submit Copy A of all Forms 1099-MISC along with Form 1096 (transmittal summary) to the IRS by March 2, 2015 (paper) or March 31, 2015 (electronic). If you're filing 250 or more forms, electronic filing is mandatory.

Step 7: Keep Records

Retain Copy C and all supporting documentation (Form W-9s, payment records) for at least four years from the filing deadline. IRS 2014 Instructions for Form 1099-MISC

Common Mistakes and How to Avoid Them

Mistake #1: Confusing Employees with Independent Contractors

The most frequent error is treating someone as an independent contractor when they should be an employee. This triggers penalties and back taxes. To avoid this, carefully review the IRS's common-law test considering behavioral control, financial control, and relationship type. When in doubt, file Form SS-8 to request an IRS determination, or consult a tax professional.

Mistake #2: Missing the TIN

Failing to collect a valid TIN before payment creates problems. Without it, you must backup withhold at 28%, and if you fail to withhold when required, you become liable for that tax. Solution: Make Form W-9 completion a prerequisite for payment.

Mistake #3: Reporting Employee Payments in Box 7

Payments that should appear on Form W-2 (employee wages, business expense reimbursements under accountable plans) don't belong on Form 1099-MISC. This causes mismatches in IRS systems and creates headaches for both parties. Always use the correct form for the worker classification.

Mistake #4: Forgetting the Corporate Exception Limitations

Many businesses skip reporting payments to corporations, not realizing that attorney fees and medical payments to corporations MUST be reported in 2014. Review your corporate payees carefully and report legal and medical services regardless of entity type.

Mistake #5: Combining Multiple Payment Types

Don't lump different types of payments together. If you paid someone both rent (Box 1) and nonemployee compensation (Box 7), report each in the correct box. The IRS matches forms to recipient tax returns, and incorrect categorization creates discrepancies.

Mistake #6: Paper Form Quality Issues

Using forms printed from the IRS website or using faded ribbons causes processing delays and rejections. Use official IRS forms or approved substitutes, and ensure ink is dark and clear. IRS 2014 Instructions for Form 1099-MISC

What Happens After You File

Once you've filed Form 1099-MISC, several things occur:

IRS Matching Process

The IRS enters the information into its computer systems and matches it against the recipient's tax return. If the recipient reports the income correctly, nothing happens. If there's a discrepancy—the recipient doesn't report the income or reports a different amount—the IRS may send the recipient a notice (CP2000) proposing additional tax, interest, and penalties.

Recipient Tax Reporting

The independent contractor who received your Form 1099-MISC must report the Box 7 amount on their tax return, typically on Schedule C (Profit or Loss from Business) or Schedule F (Profit or Loss from Farming). They'll calculate income tax and self-employment tax on this income.

State Tax Implications

Most states require copies of Form 1099-MISC for state income tax purposes. Your recipient may owe state income tax on these payments, and some states have their own information reporting requirements.

Penalty Risk if You Don't File

If you were required to file but didn't, the IRS can assess penalties of $50 to $100 per form (2014 rates), up to a maximum annual penalty. If the IRS determines the failure was intentional disregard, penalties increase to $250 per form with no annual cap. You may also face accuracy-related penalties if the IRS believes you misclassified workers to avoid employment taxes.

Amendment Process

If either you or the recipient discovers an error after filing, you should file a corrected Form 1099-MISC promptly. The IRS generally appreciates voluntary corrections before they discover the error. IRS 2014 Instructions for Form 1099-MISC

FAQs

Q1: Do I need to file Form 1099-MISC if I paid a contractor $599?

No. The filing threshold is $600 or more during the calendar year. Payments under $600 don't require Form 1099-MISC, though you should still keep records of these payments for your own business records.

Q2: What if I paid someone partially by check and partially by credit card?

For 2014, payments made by credit card or payment card are reported by the payment settlement entity on Form 1099-K, not by you on Form 1099-MISC. Only report the amounts you paid directly by cash, check, or bank transfer. Don't include credit card payments in your Form 1099-MISC reporting.

Q3: Can I file Form 1099-MISC electronically, and is it required?

Yes, electronic filing is available and encouraged. For 2014, if you filed 250 or more information returns of any type, electronic filing was mandatory. Electronic filing offers faster processing and extends your deadline to March 31, 2015 (versus March 2 for paper). You can use IRS-approved software or the Filing Information Returns Electronically (FIRE) system.

Q4: What happens if the contractor refuses to provide their Social Security Number?

If a contractor refuses to provide a TIN, you must begin backup withholding federal income tax at 28% from their payments. Report the payments and backup withholding on Form 1099-MISC. The contractor may face penalties under Section 6723 for failure to provide their TIN. Continue withholding until they provide a valid TIN.

Q5: I hired my neighbor's teenager to help with my business. Do I need to file a 1099-MISC?

It depends. If the payments totaled $600 or more during 2014 and you paid them for services in your business (not personal services), yes. However, consider whether they should actually be classified as an employee rather than an independent contractor, especially if you controlled when, where, and how they worked.

Q6: Do I need to send Form 1099-MISC to the IRS if I've already given a copy to the recipient?

Yes. You must file Copy A with the IRS (along with Form 1096) separately from providing Copy B to the recipient. Both filing requirements exist independently—furnishing the form to the recipient doesn't satisfy your IRS filing obligation.

Q7: I paid an attorney $2,000—$1,500 for legal services and $500 to reimburse court filing fees. What amount do I report?

Report the full $2,000 in Box 7. Payments to attorneys for services include reimbursements for costs and expenses incurred as part of providing those legal services. The attorney can deduct their business expenses on their own tax return. IRS 2014 Instructions for Form 1099-MISC

Final Reminder: This guide covers 2014 requirements when nonemployee compensation was reported on Form 1099-MISC Box 7. Starting with the 2020 tax year, the IRS reintroduced Form 1099-NEC specifically for nonemployee compensation. If you're dealing with current-year filings, you'll use Form 1099-NEC instead. For questions about your specific situation, consult the official IRS instructions or a tax professional.