What IRS Form 1099-MISC (2012) Is For
IRS Form 1099-MISC (2012) is an information return used by businesses to report miscellaneous income and such payments made to nonemployees during the calendar year. This form documents compensation paid for services, rents, royalties, and healthcare payments, ensuring the IRS can verify that both the payer and payee accurately report income on their tax returns. It is required for independent contractors, vendors, and other service providers who receive income not reported on a wage and tax statement.
If you receive an IRS notice for additional tax due after filing Form 1099-MISC, consider exploring flexible IRS payment plans to resolve your balance without additional stress.
When You’d Use IRS Form 1099-MISC (2012)
Businesses must issue IRS Form 1099-MISC (2012) when reporting certain types of miscellaneous income or compensation:
- Rents: Report if you paid $600 or more for renting office space, storage units, or other business property during the tax year.
- Services and Nonemployee Compensation: File this form when independent contractors or self-employed individuals receive $600 or more for personal services or other compensation.
- Royalties and Broker Payments: Include any gross royalties or tax-exempt interest of $10 or more paid during the year.
- Health Care Payments: Report total health care payments to medical or dental service providers, regardless of their business structure or organizational form.
- Attorney and Legal Fees: Always report payments made to attorneys, even if the law firm operates as a corporation or partnership.
- Direct Sales: File Form 1099-MISC for $5,000 or more in direct sales of consumer products for resale outside a permanent retail establishment.
Key Rules or Details for the 2012 Tax Year
For the 2012 tax year, specific reporting rules applied when filing IRS Form 1099-MISC (2012):
- Reporting Thresholds: File this form if you paid $600 or more for rents, prizes, or other compensation, or $10 or more in royalty payments or tax-exempt interest.
- Who You Don’t Report: Do not report payments made to corporations, employees (who receive a wage and tax statement), or other tax-exempt organizations.
- Backup Withholding Rules: If the payee does not provide a taxpayer identification number, you must withhold 28 percent of future payments and report it to the IRS.
- Electronic Filing Requirement: Businesses that file 250 or more forms must file electronically using the IRS FIRE system or an approved software provider.
- Privacy Protection: You may truncate the payee’s identification number on recipient copies to show only the last four digits for security purposes.
- Repealed Requirement: Property owners no longer need to issue Form 1099-MISC for contractors working on rental properties.
Step-by-Step (High Level)
Here’s how to complete IRS Form 1099-MISC (2012) accurately and stay compliant:
- Step 1 – Determine Reporting Need: Confirm that your business made reportable payments that meet the required dollar thresholds for the calendar year.
- Step 2 – Gather Payee Data: Collect each recipient’s name, address, and taxpayer identification number using Form W-9 before making any payments.
- Step 3 – Obtain Correct Forms: Use the official 2012 version of Form 1099-MISC and Form 1096, not copies or forms from other tax years.
- Step 4 – Complete the Form: Fill in the correct boxes for rent, royalties, non-employee compensation, or other services, ensuring that the totals match your records.
- Step 5 – File With the IRS: Send Copy A of Form 1099-MISC with Form 1096 to the proper IRS Service Center or file electronically.
- Step 6 – Send Recipient Copies: Provide recipient copies by January 31 so that payees can include the information in their income tax filings.
- Step 7 – Maintain Records: Keep all filed forms and supporting documentation for at least three years to verify payments and income in case the IRS questions you.
If you prefer to have a representative handle IRS matters on your behalf, you can appoint an IRS Power of Attorney for a smoother process.
Common Mistakes and How to Avoid Them
Many filers make errors when completing IRS Form 1099-MISC (2012), but these can be avoided with careful attention:
- Reporting in the Wrong Box: Always use the correct box that matches the type of payment. Box 1 is for rent, Box 3 is for other income, and Box 7 is for non-employee compensation.
- Missing or Incorrect Taxpayer Identification Numbers: Verify that the recipient’s taxpayer identification number matches IRS records to avoid mismatched data and potential withholding.
- Filing for Employees Instead of Contractors: Use Form W-2 for employees, since independent contractors should only receive Form 1099-MISC for compensation paid.
- Reporting Personal Payments: Do not report personal transactions; only business-related payments qualify for information returns.
- Late Filing: Submit all forms by the IRS deadlines to avoid increasing penalties for late or inaccurate filings.
- Combining Multiple Form Types: Each form type, such as 1099-NEC or 1099-INT, requires its own separate Form 1096 transmittal sheet.
- Including Reimbursed Expenses: Always report the total amount paid, including incidental reimbursements, when the reimbursement is part of the overall service agreement.
Remember, staying current with all filings—including any unfiled individual returns—can help you avoid unnecessary penalties or IRS inquiries.
What Happens After You File
After filing IRS Form 1099-MISC (2012), the IRS matches your information returns against the payee’s tax return to confirm that income has been adequately reported. Recipients use the form to report income on their federal income tax filings, such as Schedule C for self-employed individuals. If discrepancies arise, the IRS may issue notices requesting clarification or corrected data. Keeping accurate records, verifying each account before submission, and following backup withholding rules helps prevent audits or penalties related to unreported income or underwithheld taxes.
FAQs
Do I need to file IRS Form 1099-MISC (2012) for an incorporated service provider?
Yes, unless the payment was made to a corporation that does not provide legal or medical services. Payments to attorneys or medical providers must always be reported on this form.
What happens if I submit Form 1099-MISC after the deadline?
You may face a late filing penalty that increases with the delay. Submitting corrected forms as soon as possible can help demonstrate compliance and reduce fines.
Can I file Form 1099-MISC electronically?
Yes, businesses can file electronically through the IRS FIRE system or with approved third-party vendors that meet the IRS format requirements for information returns.
Are cash payments included in reportable income?
Yes, all cash payments made for business services, royalties, or other compensation are reportable and must be included on Form 1099-MISC.
Do I need a tax professional to file my taxes?
Although not required, working with a tax professional can help ensure that your forms are accurate and comply with federal tax laws for miscellaneous income.
