Understanding tax forms doesn't have to be complicated. Form 1099-MISC is one of the most common information returns you'll encounter if you work as an independent contractor, receive rental income, or get paid for services outside of traditional employment. This guide walks you through everything you need to know about the 2017 version of this important tax document.

What Form 1099-MISC Is For

Form 1099-MISC (Miscellaneous Income) 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 receipt that tells both you and the IRS about money you received that wasn't from regular wages. IRS.gov

The form reports several categories of payments, with the most common being payments to independent contractors and freelancers (shown in Box 7 as "nonemployee compensation"). Other reportable items include rents, royalties, prizes and awards, medical and health care payments, fishing boat proceeds, and payments to attorneys.

If you're a business owner or payer, you must file Form 1099-MISC when you've paid someone $600 or more during the year for services, rents, or certain other payments in the course of your trade or business. For royalties or broker payments, the threshold drops to just $10. The key distinction: these payments must be made in the course of your business activities—personal payments aren't reportable. IRS.gov

For recipients, receiving a 1099-MISC means the IRS knows about this income, and you'll need to report it on your tax return. The income is typically subject to self-employment tax if you're an independent contractor.

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

2017 Filing Deadlines

The 2017 tax year brought significant changes to 1099-MISC filing deadlines. If you reported nonemployee compensation in Box 7, you had to file Form 1099-MISC with the IRS by January 31, 2018—whether filing on paper or electronically. This accelerated deadline was designed to combat tax refund fraud. For all other types of payments (without Box 7 amounts), the deadline was February 28, 2018 for paper filing or April 2, 2018 for electronic filing. IRS.gov

Recipients must receive their Copy B by January 31, 2018 (extended to February 15, 2018, if reporting payments in boxes 8 or 14 only).

Corrections and Late Filings

If you missed the deadline or discovered an error after filing, you'll need to file a corrected Form 1099-MISC. To submit corrections on paper forms, prepare a new form with the correct information and check the "CORRECTED" box at the top—but never check the "VOID" box, as IRS scanning equipment will ignore voided forms and your correction won't be processed. For electronic corrections, follow the procedures outlined in IRS Publication 1220. IRS.gov

Late or incorrect filings can result in penalties ranging from $50 to $260 per form, depending on how late you file and the size of your business.

Key Rules or Details for 2017

Reporting Thresholds

You must file when you've paid at least $600 for rents, services (including nonemployee compensation), prizes and awards, other income payments, medical and health care payments, or crop insurance proceeds. For royalties or broker payments in lieu of dividends, the threshold is just $10. IRS.gov

Who Gets Reported

Generally, you report payments to individuals, partnerships, and estates. Most payments to corporations are exempt, with important exceptions: medical and health care providers (even if incorporated), attorneys and law firms for legal services, and federal executive agency payments for services. IRS.gov

Trade or Business Requirement

You only report payments made in the course of your trade or business. Personal payments—like paying your neighbor to mow your home lawn—aren't reportable. Nonprofit organizations, government agencies, and even qualified pension plans count as being "in business" for reporting purposes.

Exceptions

Several payment types don't require Form 1099-MISC even if they exceed the threshold. These include employee wages (report on Form W-2), payments to most corporations, payments for merchandise, rent payments to real estate agents (though the agent must report the rent passed to property owners), credit card payments (reported on Form 1099-K instead), and scholarships. IRS.gov

Backup Withholding

If someone fails to provide you with their correct Taxpayer Identification Number (TIN), you must withhold 24% of reportable payments and remit it to the IRS, reporting the withheld amount in Box 4.

Step-by-Step (High Level)

Step 1: Gather Information Throughout the Year

Keep detailed records of all payments you make that might require reporting. For each payee, you'll need their legal name, address, and Taxpayer Identification Number (TIN). Use Form W-9 to collect this information from contractors and service providers before making payments.

Step 2: Determine Reporting Requirements

As the year ends, review your payment records. Identify anyone who received $600 or more (or $10 for royalties) in reportable payments. Remember that the threshold applies per person, not per project.

Step 3: Obtain the Correct Forms

Download official forms from IRS.gov. You cannot print IRS forms from the website and mail them in—the forms must be ordered or you must file electronically. Forms have multiple copies: Copy A goes to the IRS, Copy 1 to your state tax department, Copy B to the recipient for their records, Copy 2 to the recipient for state filing, and Copy C for your records.

Step 4: Complete the Forms Accurately

Enter your business information as the payer, the recipient's information, and payment amounts in the correct boxes. Box 7 (nonemployee compensation) is the most commonly used. Double-check all Taxpayer Identification Numbers—errors can trigger penalties.

Step 5: Furnish Copies to Recipients

Send Copy B to each recipient by January 31, 2018. This gives recipients time to prepare their tax returns. Consider sending them via certified mail to prove timely delivery.

Step 6: File with the IRS

Submit Copy A to the IRS along with Form 1096 (Annual Summary and Transmittal) if filing on paper. For 2017 Box 7 payments, the deadline is January 31, 2018. For other payments, the deadline is February 28, 2018 (paper) or April 2, 2018 (electronic). Electronic filing is required if you're filing 250 or more forms. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Using the Wrong Box

The IRS matches income reported in specific boxes to what recipients claim on their returns. Putting nonemployee compensation in Box 3 (Other Income) instead of Box 7 can cause mismatches.
Solution: Carefully read the instructions for each box and understand what type of payment you're reporting.

Mistake #2: Reporting Payments to Corporations

Many filers incorrectly issue 1099-MISC forms to corporations when they're exempt from reporting.
Solution: Ask vendors to complete Form W-9, which indicates their entity type. Remember the key exceptions: always report payments to attorneys and medical providers, even if incorporated.

Mistake #3: Missing or Incorrect TINs

Using wrong, missing, or mismatched Taxpayer Identification Numbers triggers IRS notices and potential penalties.
Solution: Collect Form W-9 from all contractors before paying them. Verify TINs match IRS records using the free TIN Matching program available to businesses.

Mistake #4: Forgetting About the Combined Payments Rule

You paid a contractor $400 for consulting and $300 for materials separately—each under $600. Together they exceed $600 and require reporting.
Solution: Track total annual payments per vendor across all projects and payment categories.

Mistake #5: Missing the Accelerated Box 7 Deadline

The January 31 deadline for forms with Box 7 amounts caught many filers off guard in 2017.
Solution: Separate your 1099-MISC forms into two groups: those with Box 7 amounts (file by January 31) and those without (file by the regular deadline). Plan ahead and don't wait until the last minute.

Mistake #6: Not Filing Corrections Promptly

Discovering an error and hoping it goes away doesn't work. The IRS will eventually notice the discrepancy.
Solution: File corrected forms as soon as you discover errors. Check the "CORRECTED" box and submit them promptly to minimize penalties.

What Happens After You File

Once you file Form 1099-MISC, the IRS uses sophisticated matching programs to compare the amounts you reported against what recipients claim on their tax returns. This process, called the Information Returns Program (IRP), happens throughout the year and can continue for several years after filing.

For Recipients

If you receive a 1099-MISC, the income is typically reported on Schedule C (for business income), Schedule E (for rents and royalties), or various lines on Form 1040 depending on the type of payment. Box 7 nonemployee compensation usually goes on Schedule C and is subject to self-employment tax, which covers Social Security and Medicare contributions—currently around 15.3% of net earnings. You can deduct business expenses against this income, which reduces both your income tax and self-employment tax.

For Payers

After filing, keep copies of all forms and supporting documentation for at least four years. The IRS may send matching notices if recipients don't properly report the income you disclosed. You might also receive CP2100 or CP2100A notices if you submitted forms with TIN/name mismatches—these require you to send "B" notices to payees and potentially begin backup withholding.

Penalties

Late filing can cost you. For 2017, penalties range from $50 per form if filed within 30 days late, up to $260 per form if filed after August 1 or not filed at all. Intentional disregard of filing requirements carries even steeper penalties—$530 per form with no maximum cap. Small businesses (gross receipts of $5 million or less) face lower maximum annual penalties. IRS.gov

State Requirements

Many states require separate filing of information returns. Check your state's department of revenue website for specific requirements, which often mirror federal rules but may have different deadlines or thresholds.

FAQs

Q1: I paid someone $550 for services. Do I need to file a 1099-MISC?

No. The $600 threshold means you only file if you paid $600 or more during the calendar year. Payments under $600 don't require Form 1099-MISC (though they're still taxable income for the recipient). However, if you paid this person any additional amounts during the year that bring the total to $600 or more, you must file.

Q2: I hired someone through a website that paid them by credit card. Do I file a 1099-MISC?

Generally, no. Payments made by credit card or through third-party payment networks (like PayPal) are reported by the payment processor on Form 1099-K, not by you on Form 1099-MISC. This prevents duplicate reporting. Only report payments you made directly by check, cash, or bank transfer. IRS.gov

Q3: What's the difference between an employee and an independent contractor for 1099 purposes?

Employees receive Form W-2 and have taxes withheld from their paychecks. Independent contractors receive Form 1099-MISC and pay their own taxes. The distinction depends on factors like who controls how work is performed, whether the worker provides their own tools, whether there's a continuing relationship, and other factors outlined in IRS Publication 15-A. Misclassifying employees as contractors can result in significant penalties and back taxes.

Q4: The contractor I paid was incorporated. Do I still file a 1099-MISC?

Usually not—payments to corporations are generally exempt from Form 1099-MISC reporting. However, you must report payments to attorneys and law firms for legal services (Boxes 7 or 14) and payments to medical and health care providers (Box 6), even if they're incorporated. When in doubt, request Form W-9, which indicates the payee's entity type. IRS.gov

Q5: I received a 1099-MISC with an incorrect amount. What should I do?

Contact the payer immediately and request a corrected form. The payer should issue a corrected Form 1099-MISC with the "CORRECTED" box checked. If the payer refuses or you can't reach them, file your tax return with the correct income amount and attach a statement explaining the discrepancy. Keep documentation supporting your correct figures in case the IRS questions the difference.

Q6: Can I e-file Form 1099-MISC?

Yes, and electronic filing is mandatory if you're filing 250 or more information returns. Even if you file fewer, electronic filing is encouraged—it's faster, reduces errors, and provides immediate confirmation of receipt. You'll need IRS-approved software that follows Publication 1220 specifications. The IRS doesn't provide a free fillable form option for 1099s like it does for individual tax returns. IRS.gov

Q7: I'm both a payer and recipient of 1099-MISC income. How does this work?

This is common for small business owners. As a payer, you must file 1099-MISC forms for contractors and service providers you paid $600 or more. As a recipient, you'll receive 1099-MISC forms from your clients. Report the income you received on your tax return (typically Schedule C), and keep copies of the 1099-MISC forms you issued to prove your business expenses if audited. These are separate responsibilities—filing forms as a payer doesn't affect your obligations as a recipient, and vice versa.

Key Takeaway: Form 1099-MISC is the IRS's way of tracking income that doesn't go through traditional payroll. Whether you're a business owner issuing these forms or a contractor receiving them, accuracy and timeliness are crucial. Keep good records, meet the deadlines (especially that January 31 deadline for Box 7 payments), and don't hesitate to consult a tax professional if you're unsure about your specific situation.

For complete instructions and the most current information, always refer to the official resources at IRS.gov/Form1099MISC.