Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

No items found.

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

Heading

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Frequently Asked Questions

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

In 2013, businesses used Form 1099-MISC, Box 7 to report payments made to independent contractors, freelancers, and other nonemployees for services rendered. The modern Form 1099-NEC didn’t exist during this period—it was reintroduced by the IRS for tax year 2020. Back in 2013, if you paid someone $600 or more for services and they weren’t your employee, you reported that compensation in Box 7 of Form 1099-MISC.

This form served as the IRS’s way of tracking income earned outside traditional employer-employee relationships. When you hired a graphic designer for marketing materials, contracted a plumber for office repairs, or paid an attorney for legal services, these payments needed to be documented on Form 1099-MISC if they totaled $600 or more during the calendar year.

The recipient used this information to report self-employment income on their tax return, typically on Schedule C or Schedule F (Form 1040).

The distinction between an employee (who receives a W-2) and a nonemployee (who receives a 1099-MISC) was critical. Nonemployee compensation meant no federal income tax, Social Security, or Medicare taxes were withheld—the recipient was responsible for paying these taxes themselves, including self-employment tax.

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Copy B (to recipients): January 31, 2014
Copy A (to the IRS): February 28, 2014 (paper) or March 31, 2014 (electronic)

Late Filing

If you missed these deadlines, you still needed to file, though penalties could apply. The IRS assessed penalties based on how late the form was filed, ranging from $30 to $100 per form depending on when the correction occurred. Filing late was always better than not filing at all, as failure-to-file penalties could be substantial.

Amended Returns

If you discovered errors after filing—such as incorrect amounts, wrong taxpayer identification numbers (TINs), or missing forms—you needed to file a corrected Form 1099-MISC.
Mark the “CORRECTED” box at the top of the form and complete it with the accurate information. Both the IRS and the recipient should receive corrected copies.

Common reasons for corrections included:

Transposed digits in a Social Security number
Miscalculated payment totals
Forgotten filings for a contractor

VOID Returns

If you filed a form entirely by mistake (e.g., wrong person, duplicate filing), you’d submit a new form marked “VOID” to remove it from the IRS system, then file the correct version if necessary.

Key Rules for 2013

$600 Threshold

Report nonemployee compensation totaling $600 or more paid to any individual, partnership, or estate during the calendar year.
Multiple small payments to the same contractor that total $600 or more must be reported.

Trade or Business Requirement

Reporting was only required for payments made in the course of a trade or business.
Personal payments—like paying someone to mow your home lawn—were not reportable.
However, nonprofits and government agencies were considered to be engaged in a trade or business for reporting purposes.

Corporate Exception

Generally, you didn’t need to report payments to corporations.
Exceptions:

Medical and health care services (Box 6)
Attorney fees (Box 7 or Box 14)

Attorney Payments

You reported:

Attorney fees of $600 or more (Box 7)
Gross proceeds paid to attorneys (Box 14), even if not for direct services

Fish Purchases

Businesses buying fish for resale had to report cash payments of $600 or more to anyone catching fish in Box 7.

Backup Withholding

If a contractor failed to provide their TIN, or the IRS notified you that a TIN was incorrect, you were required to withhold 28% of payments and report this in Box 4.

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Track all payments to nonemployees throughout the year.
Use Form W-9 to collect each contractor’s name, address, and TIN before making payments.

Step 2: Calculate Annual Totals

At year-end, total all payments to each contractor. Include:

Fees
Commissions
Prizes for services
Cash payments for incidental parts or materials

Example: A repair bill showing $400 for labor and $300 for parts = $700 total reportable income.

Step 3: Obtain Correct Forms

Order official scannable Form 1099-MISC from the IRS or use IRS-approved software.
Copies required:

Copy A (IRS)
Copy 1 (State)
Copy B (Recipient)
Copy C (Your records)
Copy 2 (Recipient’s state return)

Step 4: Complete the Forms

Enter:

Payer information
Recipient information and TIN
Total payment in Box 7
Any backup withholding in Box 4

Errors could trigger IRS notices or penalties.

Step 5: Distribute and File

Send Copy B (and Copy 2 if required) to recipients by January 31, 2014.
File Copy A with the IRS and Form 1096 by February 28, 2014 (paper) or March 31, 2014 (electronic).
Businesses filing 250 or more forms had to e-file.

Step 6: Maintain Records

Keep Copy C and all filing documentation for at least three years for audit purposes.

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Treating employees as contractors could result in back taxes, penalties, and interest.
Solution: Use the IRS common-law test on behavioral control, financial control, and relationship type (see IRS Publication 15-A).

Mistake #2: Missing or Incorrect TINs

Incorrect or missing numbers trigger IRS “B” notices.
Solution: Always collect Form W-9 before payment and verify with the IRS TIN Matching Program.

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Solution: Remember that payments for attorney fees or medical services are reportable even if made to corporations.

Mistake #4: Reporting in the Wrong Box

Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 could trigger IRS mismatches.
Solution: Double-check box instructions.

Mistake #5: Not Aggregating Payments

Failing to total multiple payments to the same contractor that exceed $600.
Solution: Maintain a year-long ledger tracking contractor payments.

Mistake #6: Using Consumer Printers for Copy A

Copy A was scannable and couldn’t be printed from the IRS website.
Solution: Order official forms or use authorized software.

What Happens After You File

IRS Processing

The IRS scanned and digitized Copy A forms, then matched data against taxpayer returns using the Automated Underreporter (AUR) system. Discrepancies could trigger notices or audits.

Recipient Tax Reporting

Recipients used Box 7 income to complete their returns:

Reported on Schedule C or Schedule F
Paid self-employment tax (15.3%) on net income

State Tax Reporting

Many states required 1099-MISC filings as well (Copy 1). Requirements varied by state.

IRS Notices

Common issues triggering notices:

TIN mismatches
Missing or duplicate filings
Unreported income by recipients

Audit Trail

Filed forms became part of the audit trail.
Keep contracts, invoices, and proof of payments for verification.

FAQs

Q1: What if I paid someone $599—do I still need to file?

No. The reporting threshold was $600 or more, but keep documentation for business expense records.

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Yes—assuming your nephew isn’t incorporated and the payment was for business purposes. Family relationships don’t exempt you from filing.

Q3: The contractor I hired never sent me their W-9. What should I do?

You must still file and begin backup withholding (28%) until a valid TIN is provided.
Report withheld amounts in Box 4 and document your attempts to collect the W-9.

Q4: I discovered an error in March 2014. Is it too late to correct it?

No. File a corrected Form 1099-MISC immediately. Mark the “CORRECTED” box and submit accurate details.

Q5: Do I need to file if I paid through PayPal or a credit card?

No. Payments via credit cards or third-party networks (like PayPal) were reported by those entities on Form 1099-K.

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Yes. All businesses—including sole proprietors—must report nonemployee payments of $600 or more for services.

Q7: What’s the difference between Box 3 and Box 7?

Box 7 (Nonemployee Compensation): For services performed by nonemployees; subject to self-employment tax.
Box 3 (Other Income): For miscellaneous income not related to services (e.g., prizes, awards, termination payments).

Sources

IRS Form 1099-MISC (2013)
2013 Instructions for Form 1099-MISC
IRS.gov: Information Returns
IRS Publication 15-A: Employer’s Supplemental Tax Guide

This guide summarizes IRS rules for 2013 and is for informational purposes only. Always consult the official IRS instructions or a tax professional for current filing requirements.

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Late Filing

Amended Returns

VOID Returns

Key Rules for 2013

$600 Threshold

Trade or Business Requirement

Corporate Exception

Attorney Payments

Fish Purchases

Backup Withholding

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Step 2: Calculate Annual Totals

Step 3: Obtain Correct Forms

Step 4: Complete the Forms

Step 5: Distribute and File

Step 6: Maintain Records

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Mistake #2: Missing or Incorrect TINs

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Mistake #4: Reporting in the Wrong Box

Mistake #5: Not Aggregating Payments

Mistake #6: Using Consumer Printers for Copy A

What Happens After You File

IRS Processing

Recipient Tax Reporting

State Tax Reporting

IRS Notices

Audit Trail

FAQs

Q1: What if I paid someone $599—do I still need to file?

Q2: I paid my nephew $1,000 to build my company website. Do I need to file?

Q3: The contractor I hired never sent me their W-9. What should I do?

Q4: I discovered an error in March 2014. Is it too late to correct it?

Q5: Do I need to file if I paid through PayPal or a credit card?

Q6: I’m a sole proprietor who paid another sole proprietor. Do I still file?

Q7: What’s the difference between Box 3 and Box 7?

Sources

Thank you for submitting!

Frequently Asked Questions

Related Articles

Form 1099-MISC Box 7: Nonemployee Compensation (2013 Tax Year)

What the Form Is For

When You’d Use Form 1099-MISC (Late/Amended Filings)

Original Deadlines

Late Filing

Amended Returns

VOID Returns

Key Rules for 2013

$600 Threshold

Trade or Business Requirement

Corporate Exception

Attorney Payments

Fish Purchases

Backup Withholding

Step-by-Step Filing Process (High Level)

Step 1: Identify Qualifying Payments

Step 2: Calculate Annual Totals

Step 3: Obtain Correct Forms

Step 4: Complete the Forms

Step 5: Distribute and File

Step 6: Maintain Records

Common Mistakes and How to Avoid Them

Mistake #1: Misclassifying Workers

Mistake #2: Missing or Incorrect TINs

Mistake #3: Not Reporting Corporate Attorneys or Medical Providers

Mistake #4: Reporting in the Wrong Box

Mistake #5: Not Aggregating Payments

Mistake #6: Using Consumer Printers for Copy A

What Happens After You File

IRS Processing

Recipient Tax Reporting

State Tax Reporting

IRS Notices

Audit Trail