What the Form Is For

Form 1099-MISC is an IRS information return used to report various types of miscellaneous income paid to individuals and businesses during a tax year. If you're a business owner, landlord, or organization making certain payments, you'll use this form to inform both the IRS and the recipient about the income they received from you.

Important 2020 Change: Starting in 2020, the IRS brought back Form 1099-NEC (Nonemployee Compensation) to report payments to independent contractors and freelancers. Previously, these payments were reported in Box 7 of Form 1099-MISC, but they now have their own dedicated form. This means Form 1099-MISC for 2020 underwent significant redesign, with boxes renumbered and its scope narrowed to focus on other types of miscellaneous income.

Form 1099-MISC is required when you pay someone in the course of your trade or business (not personal payments) and the payment meets certain thresholds and categories. You must file this form with the IRS and provide a copy to the recipient so they can accurately report the income on their tax return. IRS.gov

When You’d Use This Form (Including Late and Amended Returns)

Standard Filing Timeline

For the 2020 tax year, Form 1099-MISC has different deadlines depending on how you file:

• Paper filing: March 1, 2021
• Electronic filing: March 31, 2021
• Recipient copies: January 31, 2021 (you must furnish statements to recipients by this date)

These deadlines are notably different from Form 1099-NEC, which must be filed by January 31 regardless of filing method. IRS.gov

Late Filing

If you miss the deadline, you can still file Form 1099-MISC, but you'll face penalties that increase based on how late you file:

• 1-30 days late (2020): $50 per form
• 31 days to August 1: $110 per form
• After August 1 or not filed: $270 per form
• Intentional disregard: $550 per form with no maximum

These penalties have annual maximums for small businesses, but it's always better to file on time or request an extension. IRS.gov

Amended Returns

Made a mistake on a Form 1099-MISC you already submitted? You'll need to file a corrected return. To do this:

• Check the "CORRECTED" box at the top of a new Form 1099-MISC
• Fill in the correct information
• Do not check the "VOID" box (that tells IRS scanners to ignore the form entirely)
• Submit the corrected form to the IRS following the same procedures as original filing
• Send a corrected copy to the recipient as well so they can amend their own tax return if necessary.

Key Rules or Details for 2020

Reporting Thresholds

You must file Form 1099-MISC when you've paid someone during the 2020 tax year:

• $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest
• $600 or more in:
  • Rents (Box 1)
  • Prizes and awards (Box 3)
  • Other income payments (Box 3)
  • Medical and health care payments (Box 6)
  • Crop insurance proceeds (Box 9)
  • Gross proceeds paid to attorneys (Box 10)
  • Section 409A deferrals (Box 12)
  • Nonqualified deferred compensation (Box 14)

You must also file if you withheld any federal income tax under backup withholding rules, regardless of the payment amount. IRS.gov

Who Gets a Form 1099-MISC

Generally, you report payments to:

• Individuals
• Sole proprietors
• Partnerships
• Estates
• Law firms and attorneys (even if incorporated—an exception to the corporate exemption)

Who Doesn't Get One

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

• Payments to C corporations or S corporations (except for legal services and medical/health care payments)
• Payments for merchandise, freight, storage, or similar items
• Employee wages (use Form W-2 instead)
• Payments to tax-exempt organizations or government entities
• Rent paid to real estate agents or property managers (though they must report it to the property owner)

Critical 2020 Box Changes

With the redesign, box numbers shifted significantly:

• Box 1: Rents
• Box 2: Royalties
• Box 3: Other income (prizes, awards, damages, etc.)
• Box 4: Federal income tax withheld
• Box 5: Fishing boat proceeds
• Box 6: Medical and health care payments
• Box 7: Checkbox for direct sales of $5,000 or more
• Box 8: Substitute payments in lieu of dividends or interest
• Box 9: Crop insurance proceeds
• Box 10: Gross proceeds paid to attorneys
• Boxes 12 & 14: Deferred compensation reporting

Important: Independent contractor payments that were previously in Box 7 are now reported on the separate Form 1099-NEC. IRS.gov

Step-by-Step (High Level)

Step 1: Determine If You Need to File

Review all payments made during 2020 in the course of your business. Check whether they meet the dollar thresholds and payment categories requiring Form 1099-MISC.

Step 2: Gather Recipient Information

You'll need each recipient's:

• Full legal name
• Address
• Taxpayer Identification Number (TIN)—either Social Security Number (SSN) or Employer Identification Number (EIN)

Use Form W-9 to collect this information from recipients before making payments. Without a valid TIN, you may need to begin backup withholding at the current rate (24% for 2020).

Step 3: Complete the Form

Fill out Form 1099-MISC with:

• Your information as the payer
• Recipient information
• Payment amounts in the appropriate boxes
• Any federal income tax withheld (Box 4)
• State tax information if required (Boxes 15-17)

Step 4: File with the IRS

• Paper filing: Submit Copy A of all Forms 1099-MISC along with Form 1096 (Annual Summary and Transmittal) by mail to the appropriate IRS address by March 1, 2021
• Electronic filing: File through the IRS FIRE (Filing Information Returns Electronically) system by March 31, 2021

Note: If you file 10 or more information returns total (across all 1099 forms), you may be required to file electronically.

Step 5: Provide Copies to Recipients

Furnish Copy B to each recipient by January 31, 2021. You can mail them or make them available electronically if the recipient consents.

Step 6: Keep Your Records

Retain Copy C for your files. Keep these records for at least four years in case of IRS questions or audits.

Common Mistakes and How to Avoid Them

Mistake #1: Confusing 1099-MISC with 1099-NEC

The Problem: In 2020, nonemployee compensation moved to Form 1099-NEC. Many filers mistakenly continued reporting independent contractor payments on Form 1099-MISC.
How to Avoid: If you paid someone for services and they're not your employee, use Form 1099-NEC (not 1099-MISC). Form 1099-MISC is now for rents, royalties, prizes, attorney proceeds, and other miscellaneous income—not for contractor payments.

Mistake #2: Wrong or Missing Taxpayer Identification Numbers

The Problem: Filing with an incorrect, missing, or mismatched TIN can trigger IRS notices and backup withholding requirements.
How to Avoid: Always request Form W-9 from recipients before making reportable payments. Verify the information matches IRS records. Consider using the IRS TIN Matching service if available to your business.

Mistake #3: Putting Amounts in the Wrong Box

The Problem: With the 2020 box renumbering, it's easy to put payments in outdated box positions. The IRS matches box-specific amounts to recipient tax returns, so wrong boxes create matching errors.
How to Avoid: Use the current-year instructions and double-check box numbers. For example, "Other income" is now Box 3, not Box 7 where it used to be reported.

Mistake #4: Reporting Payments That Don't Require Form 1099-MISC

The Problem: Filing unnecessary forms or reporting payments to corporations (except for attorneys and medical providers) creates extra paperwork and potential confusion.
How to Avoid: Review the exceptions carefully. Payments to C or S corporations generally don't require reporting (except legal services and medical/health care payments). Personal payments made outside your business don't require filing.

Mistake #5: Missing the Recipient Copy Deadline

The Problem: While you have until March 1 (paper) or March 31 (electronic) to file with the IRS, recipients need their copies by January 31. Missing this earlier deadline triggers separate penalties.
How to Avoid: Prioritize sending recipient copies first. Set a reminder for mid-January to ensure copies reach recipients by the January 31 deadline. Filing with the IRS can come later.

Mistake #6: Checking the VOID Box on Corrections

The Problem: When filing a corrected return, checking "VOID" instead of "CORRECTED" tells IRS scanners to ignore the form completely, so your correction won't be processed.
How to Avoid: Use the "CORRECTED" checkbox for amendments. Only mark "VOID" when you need to completely cancel a form filed in error (and you're not replacing it with corrected information).

What Happens After You File

IRS Processing

Once you file Form 1099-MISC, the IRS adds the information to its computer system. Throughout the year, the agency matches the income you reported against what recipients claim on their tax returns. This matching program helps the IRS identify underreported income.

For Recipients

Recipients use the information on Form 1099-MISC to complete their own tax returns. The specific reporting location depends on the type of income:

• Box 1 (Rents): Typically Schedule E for rental real estate
• Box 2 (Royalties): Schedule E or Schedule C depending on the situation
• Box 3 (Other income): Usually "Other income" line on Schedule 1 (Form 1040)
• Box 6 (Medical payments): Schedule C for self-employed medical providers
• Box 10 (Attorney proceeds): Various locations depending on the nature of the payment

Discrepancy Notices

If the IRS computer system finds a mismatch between what you reported and what the recipient claimed, either party may receive a notice. For payers, this typically asks for clarification or correction. Recipients might receive a CP2000 notice proposing changes to their tax return.

These notices aren't bills or accusations—they're requests to review and explain discrepancies. Respond promptly with documentation supporting your original filing or file a corrected return if you discover an error.

Backup Withholding Consequences

If you failed to get a TIN from a recipient and didn't perform backup withholding, the IRS may assess penalties. If you did withhold, those amounts should be reported in Box 4 and deposited with the IRS using Form 945 (Annual Return of Federal Income Tax Withheld).

State Tax Reporting

Many states have information-sharing agreements with the IRS. When you file Form 1099-MISC federally, that information may automatically flow to state tax agencies. Some states require separate filing—check your state's requirements. Boxes 15-17 on Form 1099-MISC allow you to report state withholding and income information.

FAQs

Q1: I paid someone $599. Do I need to file Form 1099-MISC?

No. For most payment categories on Form 1099-MISC, the threshold is $600 or more. You only report payments that meet or exceed $600 (or $10 for royalties and broker payments). However, you should still file if you withheld any federal income tax under backup withholding rules, regardless of the amount.

Q2: Do I need to report payments made with a credit card or through payment processors?

No. Payments made with credit cards, debit cards, or through third-party settlement organizations are reported by those payment processors on Form 1099-K. You don't need to report them again on Form 1099-MISC. This prevents duplicate reporting of the same income. IRS.gov

Q3: What's the difference between Form 1099-MISC and Form 1099-NEC for 2020?

Form 1099-NEC (Nonemployee Compensation) was reintroduced in 2020 specifically for reporting payments to independent contractors, freelancers, and other non-employees for services. Form 1099-MISC now covers other types of income like rents, royalties, prizes, and attorney proceeds. Form 1099-NEC has a January 31 filing deadline for both IRS and recipient copies, while Form 1099-MISC has later deadlines (March 1 for paper, March 31 for e-filing). IRS.gov

Q4: I received a Form 1099-MISC but the amount is wrong. What should I do?

Contact the payer immediately and request a corrected Form 1099-MISC. The payer should file an amended return with the IRS 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. Keep documentation supporting the correct amount in case the IRS questions the discrepancy.

Q5: Can I file Form 1099-MISC online instead of using paper forms?

Yes. The IRS encourages electronic filing through the FIRE (Filing Information Returns Electronically) system. Electronic filing gives you an extra month (until March 31 instead of March 1) and is required if you file 10 or more information returns in total. Electronic filing is faster, more accurate, and provides immediate confirmation of receipt.

Q6: Do I need to report rent I paid to my landlord for my business office?

Yes, if you paid $600 or more in rent during the year for business purposes. However, if you paid rent to a real estate agent or property management company, you report it to them (in Box 1), and they're responsible for reporting it to the actual property owner. If you pay rent directly to a corporation that owns the property, you generally don't need to file Form 1099-MISC because corporations are exempt from most reporting requirements. IRS.gov

Q7: What penalties apply if I don't file Form 1099-MISC?

For 2020 tax year forms, penalties range from $50 to $550 per form depending on how late you file and whether the IRS considers the failure intentional. Small businesses face maximum annual penalties, but these can still add up quickly. Additionally, if you fail to furnish correct recipient statements, you face separate $50-$270 penalties per statement. The best approach is to file accurately and on time, or request an extension using Form 8809 if you need more time. IRS.gov

Additional Resources

• IRS Form 1099-MISC Page
• 2020 Instructions for Forms 1099-MISC and 1099-NEC (PDF)
• General Instructions for Certain Information Returns
• Information Return Penalties

You have not enough Humanizer words left. Upgrade your Surfer plan.

‍