Form 1099-MISC (Miscellaneous Income) — 2020 Guide
What Form 1099-MISC Is For
Form 1099-MISC is an official IRS information return that businesses and individuals use to report various types of miscellaneous payments made during the calendar year. Think of it as a receipt that tells both the IRS and the payment recipient that money changed hands for specific services or situations.
For the 2020 tax year, Form 1099-MISC underwent significant changes. The IRS brought back Form 1099-NEC (Nonemployee Compensation) to handle payments to independent contractors, which previously appeared on Form 1099-MISC. This means the 2020 version of Form 1099-MISC focuses on different types of payments, including rents, royalties, prizes and awards, medical and healthcare payments, crop insurance proceeds, payments to attorneys, and fishing boat proceeds.
You'll need to file Form 1099-MISC if you paid at least $10 in royalties or broker payments, or at least $600 in rents, prizes and awards, other income payments, medical and healthcare services, crop insurance proceeds, payments to attorneys, or fishing boat proceeds. Additionally, if you made direct sales of at least $5,000 of consumer products for resale anywhere other than a permanent retail establishment, you must report this on Form 1099-MISC.
The form serves a dual purpose: it informs the IRS about payments so they can verify that recipients properly report income, and it provides payment recipients with the information they need to complete their tax returns. IRS.gov
When You’d Use Form 1099-MISC (Late/Amended Filings)
For the 2020 tax year, Form 1099-MISC had specific filing deadlines that differed from prior years. You must file Form 1099-MISC with the IRS by March 1, 2021 if filing on paper, or by March 31, 2021 if filing electronically. Recipients must receive their copies by January 31, 2021, unless the form reports amounts in boxes 8 (substitute payments) or 10 (gross proceeds paid to an attorney), in which case the deadline extends to February 16, 2021.
If you missed these deadlines or discovered errors after filing, you'll need to file a corrected Form 1099-MISC. To correct an already-filed form, check the "CORRECTED" box at the top of the form and complete all required fields with the correct information. Never check the "VOID" box when filing corrections—this tells IRS scanning equipment to ignore the form entirely, meaning your correction won't be processed.
You can request extensions for filing information returns using Form 8809, Application for Extension of Time to File Information Returns. However, plan ahead—the IRS eliminated automatic 30-day extensions for forms reporting nonemployee compensation starting in 2020. IRS.gov
Key Rules or Details for 2020
The 2020 tax year brought fundamental changes to Form 1099-MISC that you need to understand. The most significant change was the restoration of Form 1099-NEC, which hadn't been used since 1982. Starting in 2020, all nonemployee compensation (payments to independent contractors) moved from Form 1099-MISC to the new Form 1099-NEC. This shift also reorganized the box numbers on Form 1099-MISC.
The $600 threshold remains the standard for most reportable payments. You must file if you paid $600 or more in rents, prizes and awards, medical payments, payments to attorneys, crop insurance proceeds, or fishing boat proceeds. The royalty threshold is lower at just $10. You must also file regardless of the amount if you withheld any federal income tax under backup withholding rules.
Important exceptions exist: you generally don't need to report payments to corporations (except for medical/healthcare services and attorney payments), payments for merchandise or similar items, wages to employees (use Form W-2 instead), or payments to tax-exempt organizations. However, the corporation exemption does not apply to medical and health care payments or payments to attorneys, even if they're incorporated.
Trade or business activity triggers the reporting requirement. Personal payments don't require Form 1099-MISC. If you operate for gain or profit—whether as a for-profit business, nonprofit organization, trust of qualified pension plans, or government agency—you're considered engaged in trade or business and must file when payment thresholds are met. IRS.gov
Step-by-Step (High Level)
Filing Form 1099-MISC involves several straightforward steps:
Step 1: Gather Information
Collect the taxpayer identification numbers (TINs) for all payment recipients throughout the year. Use Form W-9 to request this information from payees before making payments. Having correct TINs prevents backup withholding requirements and penalties.
Step 2: Track Payments
Maintain accurate records of all payments that might require reporting. Categorize payments according to the appropriate box on Form 1099-MISC (rents, royalties, other income, medical payments, etc.).
Step 3: Determine Filing Requirements
Review which payments meet the reporting thresholds. Remember the $600 rule for most categories and $10 for royalties. Check if any exemptions apply.
Step 4: Complete the Forms
Fill out Form 1099-MISC for each recipient who meets reporting requirements. Copy A goes to the IRS, Copy 1 to your state tax department (if required), Copy B to the recipient for their tax return, and Copy C is for your records.
Step 5: File With the IRS
Submit forms by the deadline—paper filing by March 1 or electronic filing by March 31. If you're filing 250 or more forms, electronic filing is mandatory. Include Form 1096 (Annual Summary and Transmittal) with paper filings.
Step 6: Furnish Recipient Copies
Provide Copy B to recipients by January 31, giving them time to prepare their tax returns. IRS.gov
Common Mistakes and How to Avoid Them
Mistake #1: Reporting in the Wrong Box
The IRS uses box numbers to verify proper income reporting. For 2020, box numbers changed due to Form 1099-NEC's introduction. Double-check that rents go in box 1, royalties in box 2, other income in box 3, and so on. Misplaced amounts can trigger IRS notices.
Mistake #2: Incorrect or Missing TINs
Missing or incorrect taxpayer identification numbers are the most common error. Always request Form W-9 from payees before making payments. Verify social security numbers are formatted as XXX-XX-XXXX and employer identification numbers as XX-XXXXXXX.
Mistake #3: Filing for the Wrong Payment Type
Remember that independent contractor payments now go on Form 1099-NEC, not Form 1099-MISC. Review the specific categories that belong on Form 1099-MISC before filing.
Mistake #4: Missing Filing Deadlines
The March 1 (paper) and March 31 (electronic) deadlines are firm. Set calendar reminders well in advance. Late filings incur penalties ranging from $50 to $270 per form depending on how late you file.
Mistake #5: Not Checking the Corporation Exemption
While corporations are generally exempt from Form 1099-MISC requirements, medical/healthcare payments and attorney payments must be reported even to corporations. Don't assume all corporate payments are exempt.
Mistake #6: Using Downloaded Forms for IRS Filing
Never print Copy A from the IRS website and mail it to the IRS. These forms lack the special scannable ink required for processing. Order official forms from the IRS or file electronically. IRS.gov
What Happens After You File
Once you file Form 1099-MISC, several processes begin:
IRS Matching Program
The IRS uses sophisticated computer systems to match the information you report on Forms 1099-MISC with what recipients report on their tax returns. If discrepancies exist—for example, if a recipient fails to report income you documented—the IRS may send notices to both parties requesting clarification.
Recipient Tax Reporting
Recipients use the information from Form 1099-MISC to complete their tax returns. Depending on the type of income, they'll report amounts on different forms: Schedule E for rental income, Schedule C for business income, or directly on Form 1040 for prizes and awards.
Record Retention
Keep copies of all Forms 1099-MISC you file for at least four years. The IRS can request documentation during audits, and you may need records to resolve disputes or respond to IRS inquiries.
Penalties for Non-Compliance
If you fail to file correct Forms 1099-MISC on time, penalties apply. For 2020, penalties range from $50 per form if you file within 30 days late, up to $270 per form if filed after August 1 or not filed at all. Intentional disregard carries a $550 per form penalty with no maximum limit. Small businesses (average annual gross receipts of $5 million or less for the three most recent tax years) face lower maximum penalties. IRS.gov
FAQs
Q1: What's the difference between Form 1099-MISC and Form 1099-NEC for 2020?
Starting in 2020, the IRS separated nonemployee compensation (independent contractor payments) onto Form 1099-NEC. Form 1099-MISC now handles other miscellaneous payments like rents, royalties, prizes, and medical payments. This change also moved the January 31 filing deadline to Form 1099-NEC, while Form 1099-MISC retained the later filing deadlines.
Q2: Do I need to file Form 1099-MISC for payments under $600?
Generally, no—unless you withheld federal income tax under backup withholding rules. However, royalty payments require filing if they total $10 or more. Always file when backup withholding applies, regardless of the payment amount.
Q3: Can I file Form 1099-MISC electronically?
Yes, and electronic filing is mandatory if you're filing 250 or more information returns. Electronic filing offers several advantages: later deadlines (March 31 vs. March 1), faster processing, immediate confirmation of receipt, and reduced errors. You can use the IRS Filing Information Returns Electronically (FIRE) system or approved commercial software.
Q4: What if I receive an incorrect Form 1099-MISC?
Contact the payer immediately and request a corrected form. If the payer refuses or you cannot reach them, attach a written explanation to your tax return explaining the discrepancy and reporting the correct amount. Keep documentation of your attempts to get the form corrected.
Q5: Do I need to report payments to my landlord?
It depends. If you're paying rent in the course of your trade or business and pay $600 or more during the year, you must file Form 1099-MISC. Personal rent payments for your home don't require reporting. If you pay rent to a property manager or real estate agent, you don't need to file—but the manager must report the rent paid to the property owner.
Q6: What's backup withholding, and when does it apply to Form 1099-MISC?
Backup withholding is a type of federal income tax withholding that applies when a payee fails to provide a correct TIN or the IRS notifies you that backup withholding is required. You must withhold 24% of reportable payments and remit it to the IRS. Report the withheld amount in box 4 of Form 1099-MISC.
Q7: Can I file Form 1099-MISC after the deadline?
Yes, but penalties apply. File as soon as possible to minimize penalties. The penalty increases the longer you wait: $50 per form if filed within 30 days late, $110 if filed between 31 days and August 1, and $270 if filed after August 1 or not filed at all. If you need an extension, file Form 8809 before the original deadline.
This guide provides essential information about Form 1099-MISC for tax year 2020 based on official IRS instructions and publications. For specific situations or complex scenarios, consult a tax professional or visit IRS.gov for the complete instructions.
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