What the Form Is For

Form 1099-MISC is an information return that businesses and individuals use to report various types of payments made during the tax year. Think of it as a "payment receipt" that tells both the recipient and the IRS about money that changed hands outside of regular employee wages.

In 2015, businesses were required to file Form 1099-MISC when they paid $600 or more (in most cases) to non-employees for services, rent, prizes, or other types of income in the course of their trade or business. The form serves a critical role in the tax system by creating a paper trail—ensuring that income recipients report what they earned, and that payers can document their business expenses.

The "MISC" in the name stands for "miscellaneous," reflecting the form's versatility. It covers everything from payments to independent contractors and rent on office space to royalties for using someone's copyrighted work. For 2015, this form also included nonemployee compensation in Box 7 (though this would later move to a separate Form 1099-NEC starting in 2020).

You might receive a 1099-MISC if you're a freelancer, consultant, landlord, or attorney—essentially anyone who provides services or receives certain types of income outside of traditional employment. Conversely, if you're a business owner who pays others for goods or services, you'll likely need to issue these forms.

When You’d Use This Form (Filing Late or Amended Returns)

Original Filing Deadlines

For the 2015 tax year, businesses had to file Form 1099-MISC with the IRS by February 29, 2016 (for paper filing) or March 31, 2016 (for electronic filing). However, if Box 8 (substitute payments) or Box 14 (gross proceeds paid to attorneys) contained amounts, the deadline was February 16, 2016 for recipient copies.

Filing a Late Return

If you missed the deadline, you should still file as soon as possible. The IRS assesses penalties for late filing based on how late the form is submitted—the sooner you file, the lower the penalty. Don't let fear of penalties prevent you from filing; not filing at all results in even steeper consequences. Late returns follow the same filing procedures as timely returns, using the same form and sending it to the same IRS Service Center.

Filing a Corrected (Amended) Return

Discovered an error after filing? You'll need to file a corrected Form 1099-MISC. Here's what to do:

For paper corrections: Complete a new Form 1099-MISC with the correct information and check the "CORRECTED" box at the top of the form. Never check the VOID box—this tells IRS scanning equipment to skip the form entirely, and your correction won't be entered into IRS records.

For electronic corrections: Follow the procedures outlined in Publication 1220, which provides specifications for electronic filing.

Send the corrected form to the IRS using the same filing address as original returns, along with a new Form 1096 transmittal.

Provide a corrected copy to the recipient so they can amend their tax return if necessary.

Common reasons for corrections include wrong dollar amounts, incorrect taxpayer identification numbers (TINs), payments reported in the wrong box, or missing information.

Key Rules or Details for 2015

Reporting Thresholds

Understanding the reporting thresholds is essential to compliance. For 2015, you must file Form 1099-MISC if you paid:

$600 or More For:

• Rents (Box 1)
• Services performed by non-employees (Box 7)—this includes independent contractors, freelancers, and consultants
• Prizes and awards (Box 3, unless for services, then Box 7)
• Other income payments (Box 3)
• Medical and health care payments (Box 6)
• Cash payments for fish or other aquatic life purchases (Box 7)
• Payments to attorneys (Box 7 for attorney fees; Box 14 for gross proceeds)
• Notional principal contract payments to individuals, partnerships, or estates (Box 7)

$10 or More For:

• Royalties (Box 2)
• Broker payments in lieu of dividends or tax-exempt interest (Box 8)

Other Requirements:

• Direct sales of $5,000 or more of consumer products for resale (Box 9)
• Any amount if you withheld federal income tax under backup withholding rules (Box 4)

Important Exceptions

You generally don't need to file Form 1099-MISC for:

• Payments to corporations (with exceptions for medical/health care payments, attorney fees, and gross proceeds paid to attorneys)
• Employee wages (use Form W-2 instead)
• Payments to tax-exempt organizations
• Personal payments not made in the course of your trade or business
• Payments for merchandise, telegrams, telephone, freight, or storage
• Credit card or payment card transactions (these are reported on Form 1099-K by payment processors)

Critical Rule for Businesses

Reporting requirements apply only to payments made "in the course of your trade or business." Personal payments—such as paying your neighbor to mow your lawn—are not reportable unless you're running a business.

Step-by-Step (High Level)

Filing Form 1099-MISC involves several steps, from gathering information throughout the year to submitting forms to the IRS and recipients. Here's the process simplified:

#### 1. Collect Information Throughout the Year (January–December 2015)

Track all payments you make to non-employees and other reportable recipients
Have each service provider or vendor complete Form W-9 (Request for Taxpayer Identification Number) to obtain their correct name and TIN
Keep accurate records of payment dates, amounts, and types

#### 2. Determine Who Needs a Form (December 2015–January 2016)

Review your payment records to identify recipients who meet the reporting thresholds
Verify you have correct taxpayer identification numbers for each recipient
Separate payments by type to determine the correct box for reporting

#### 3. Obtain the Correct Forms (January 2016)

Order official IRS forms or use approved substitute forms that meet IRS specifications (see Publication 1179)
You'll need Copy A (red form) for the IRS, Copy B and Copy 2 for the recipient, and Copy C for your records
Consider electronic filing if you're filing 250 or more forms (it's mandatory at that threshold)

#### 4. Complete the Forms (January–February 2016)

Enter your business name, address, and Employer Identification Number (EIN) in the payer section
Enter the recipient's name, address, and TIN exactly as shown on their Form W-9
Report payments in the correct box—this is crucial because the IRS uses box placement to determine the type of income
Include any backup withholding in Box 4 if applicable

#### 5. File with the IRS (By February 29, 2016 for paper; March 31, 2016 for electronic)

Mail paper forms with Form 1096 (transmittal) to the appropriate IRS Service Center for your state
Or file electronically through the IRS FIRE (Filing Information Returns Electronically) System

#### 6. Provide Copies to Recipients (By February 16, 2016 for most; earlier for Box 8 or 14 amounts)

Send Copy B to each recipient
Recipients need these forms to complete their tax returns

#### 7. Keep Records

Retain Copy C and supporting documentation for at least 3 years from the form's due date (4 years if backup withholding was involved)

Common Mistakes and How to Avoid Them

Mistake #1: Reporting Payments in the Wrong Box

Many filers confuse which box to use. For example, putting nonemployee compensation in Box 3 instead of Box 7 can cause problems because Box 7 income is subject to self-employment tax. Solution: Carefully review the box instructions. When in doubt, consult the specific instructions for your payment type. The IRS uses box placement to determine tax treatment, so accuracy matters.

Mistake #2: Missing or Incorrect Taxpayer Identification Numbers

Filing without a correct TIN or using a mismatched name/TIN combination triggers IRS notices and potential penalties. Solution: Always request Form W-9 from payees before making payments. Verify the information carefully. Consider using the IRS TIN Matching program to validate name/TIN combinations before filing.

Mistake #3: Not Filing for Corporate Payments When Required

While most corporate payments are exempt from 1099-MISC reporting, important exceptions exist—particularly medical/health care payments, attorney fees, and gross proceeds to attorneys. Solution: Don't automatically skip corporations. Check if the payment falls into an exception category requiring reporting.

Mistake #4: Reporting Personal Payments

Payments not made in the course of your trade or business aren't reportable. Solution: Only report business-related payments. If you're not operating a business (nonprofit organizations are considered businesses for this purpose), you likely don't need to file.

Mistake #5: Including Reimbursed Expenses Incorrectly

Some filers aren't sure whether to include expense reimbursements in reported amounts. Solution: If you paid for services and materials together (like hiring a contractor who provides both labor and supplies), report the total amount. However, if you separately reimbursed actual expenses under an accountable plan with proper documentation, those might not be reportable income.

Mistake #6: Missing the Correct Filing Deadline

Different boxes have different recipient copy deadlines, causing confusion. Solution: Mark your calendar clearly. Most 1099-MISC forms require recipient copies by February 16 (not February 1), but Box 8 and 14 amounts have an earlier deadline. Set reminders well in advance.

Mistake #7: Checking the VOID Box on Corrections

A checked VOID box tells IRS scanners to ignore the form completely. Solution: For corrections, check only the "CORRECTED" box, never VOID. Use VOID only if you're submitting the form alongside a corrected version in the same submission to show which form to ignore.

Mistake #8: Failing to Backup Withhold When Required

If a payee doesn't provide a TIN or the IRS notifies you of a TIN mismatch, you're required to backup withhold 28% of reportable payments (for 2015). Solution: Implement procedures to obtain W-9 forms before making payments. If you receive IRS backup withholding notices, act promptly to begin withholding.

What Happens After You File

Once you've filed Form 1099-MISC, several processes begin:

IRS Processing: The IRS receives your forms and matches them against the recipient's tax return. This matching process helps ensure that taxpayers report all their income. If the IRS identifies discrepancies—such as a 1099-MISC showing income that wasn't reported on the recipient's return—they may send a notice to the taxpayer.

Recipient Responsibilities: Recipients use the information on Form 1099-MISC to complete their tax returns. Amounts from Box 7 (nonemployee compensation) typically go on Schedule C if the recipient is self-employed, while other boxes may report on different schedules or forms. Recipients must report this income even if they don't receive a 1099-MISC, but having the form helps them report accurately.

Backup Withholding Remittance: If you withheld federal income tax under backup withholding rules (reported in Box 4), you must deposit these amounts using Form 945, Annual Return of Withheld Federal Income Tax. Backup withholding deposits follow specific schedules based on the total amount withheld.

Potential IRS Notices: You might receive notices from the IRS if:

• Name/TIN combinations don't match IRS records (CP2100 or CP2100A notices)
• Forms were filed late or incorrectly
• Required forms weren't filed at all

These notices typically provide instructions for correcting issues and may assess penalties. Respond promptly to any IRS correspondence.

Penalties (If Applicable): For 2015, penalties for incorrect or late filing ranged from $30 to $100 per form, depending on how late the filing was, with annual maximums. Intentional disregard of filing requirements carried much steeper penalties—$250 per form with no annual maximum. However, the IRS may waive penalties for reasonable cause, such as first-time filers who made good-faith efforts to comply.

Record Retention: Keep copies of filed forms and supporting documentation. These records prove you complied with reporting requirements and provide backup if questions arise during an IRS audit. The general retention period is 3 years, but 4 years is recommended if backup withholding was involved.

State Reporting: Many states have their own information reporting requirements. After filing with the IRS, check whether your state requires separate filings or accepts copies of federal forms.

FAQs

1. Do I need to file Form 1099-MISC if I paid someone through PayPal, Venmo, or credit card?

No, not usually. Payment settlement entities (like PayPal) are responsible for reporting these transactions on Form 1099-K if the recipient receives more than $20,000 and 200 transactions. You don't need to duplicate this reporting on Form 1099-MISC. However, if you paid by check or cash and meet the reporting thresholds, you still need to file.

2. What if the person I paid refuses to give me their Social Security number or EIN?

You have two options: (1) Don't make the payment until you receive a completed Form W-9, or (2) Make the payment but begin backup withholding at 28% of the reportable amount. File the 1099-MISC showing the gross payment and the amount withheld in Box 4, using the recipient's name and address but leaving the TIN field blank. The withheld amount must be deposited with the IRS using Form 945.

3. I'm self-employed and received a 1099-MISC. Do I need to file one too?

Only if you paid others $600 or more for services in the course of your business. Being self-employed doesn't automatically make you a filer—you become a filer when you make reportable payments to others. If you worked alone and didn't pay subcontractors or other service providers, you don't need to issue 1099-MISC forms.

4. Can I file Form 1099-MISC electronically, or do I have to use paper forms?

You can choose to file electronically through the IRS FIRE System, regardless of how many forms you're filing. However, if you're filing 250 or more information returns of any type, electronic filing becomes mandatory. Electronic filing offers benefits including later deadlines (March 31 vs. February 29) and immediate confirmation of receipt.

5. What's the difference between an independent contractor and an employee, and why does it matter?

This distinction is crucial. Employees receive Form W-2 and have taxes withheld from their paychecks. Independent contractors receive Form 1099-MISC (Box 7 for 2015) and are responsible for paying their own taxes. The determination depends on factors like control over work, who provides tools, and the permanency of the relationship. Misclassifying employees as contractors can result in significant penalties, back taxes, and interest. When in doubt, consult IRS Publication 15-A or seek professional advice.

6. I received a 1099-MISC, but the amount is wrong. What should I do?

Contact the payer immediately and request a corrected form. The payer should file a corrected Form 1099-MISC with the IRS (checking the CORRECTED box) and send you a corrected copy. If the payer refuses or you can't reach them, you should still report the correct amount on your tax return and attach an explanation. You might also file Form 4598 to alert the IRS to the discrepancy.

7. Do I need to send Form 1096 if I'm filing electronically?

No. Form 1096 is only required when filing paper forms—it serves as the transmittal document that accompanies your paper Forms 1099-MISC to the IRS. Electronic filers submit their information directly through the FIRE System without needing Form 1096. However, you still need to provide recipient copies (Copy B) to each person or business you paid, regardless of whether you file electronically or on paper.

Additional Resources

• IRS Form 1099-MISC (2015)
• 2015 Instructions for Form 1099-MISC
• 2015 General Instructions for Certain Information Returns

Disclaimer

This summary is for informational purposes and based on IRS guidance for the 2015 tax year. Tax laws change over time, and individual circumstances vary. For specific advice about your situation, consult a qualified tax professional.