Form 1099-MISC Completion Checklist: 2010 Tax Year Guide
Purpose
Form 1099-MISC reports miscellaneous income paid to nonemployees during the tax year. This includes payments such as rents, royalties, fishing boat proceeds, crop insurance, attorney fees, and nonemployee compensation. For the 2010 tax year, the form includes Section 409A reporting in Boxes 15a and 15b, which have been part of the form since 2005 when Section 409A became effective.
Filing Requirements
You must file Form 1099-MISC for each person to whom you paid during the year:
- At least $10 in royalties or broker payments instead of dividends or tax-exempt interest
- At least $600 in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, or cash payments for fish purchases
- Any fishing boat proceeds
- Gross proceeds paid to an attorney
You must also file for recipients from whom you withheld any federal income tax under backup withholding rules, regardless of payment amount.
Completion Steps
Step 1: Enter Complete Payer Information
Enter your full business name, complete street address, city, state, ZIP code, and telephone number in the payer section. Include your federal Employer Identification Number (EIN) or Social Security Number (SSN). The 2010 instructions require complete address disclosure for proper coordination of state and federal tax administration.
Step 2: Provide Recipient Identification Details
Report the recipient’s complete legal name, street address (including apartment number if applicable), city, state, and ZIP code. Enter the recipient’s full taxpayer identification number—either SSN, Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN). While Copy B furnished to the recipient may display only the last four digits for privacy protection, you must report the complete number to the IRS and relevant tax agencies.
Step 3: Report Box 1 Rents
Enter amounts of $600 or more for all types of rental payments, including real estate rentals, equipment rentals, and pasture rentals. Recipients generally report rental income on Schedule E (Form 1040) unless they provided significant services to tenants, operate a real estate business, rent personal property as a business, or made a qualified joint venture election—in which case they should use Schedule C or C-EZ.
Step 4: Report Box 2 Royalties
Enter royalty payments of $10 or more before reduction for severance and other taxes. Recipients report oil, gas, and mineral property royalties on Schedule E (Form 1040). However, working interests in oil and gas, as well as certain timber, coal, and iron ore royalties, follow different reporting rules, as outlined in Publication 544.
Step 5: Report Box 3 Other Income
Enter miscellaneous taxable income of $600 or more, including prizes, awards, taxable damages, Indian gaming profits distributed to tribal members, and payments to deceased employee beneficiaries. Recipients report this income on the “Other income” line of Form 1040, or on Schedule C, C-EZ, or F if it represents trade or business income. Clearly identify the nature of the payment for proper recipient reporting.
Step 6: Report Box 4 Federal Income Tax Withheld
Enter any backup withholding or Indian gaming profit withholding. You must backup withhold at 28% if the recipient failed to furnish a valid taxpayer identification number on Form W-9. Also withhold income tax on Indian gaming profits distributed to tribal members using the applicable withholding tables provided in Publication 15-A.
Step 7: Report Box 5 Fishing Boat Proceeds
Enter amounts only if the fishing boat operator considers the recipient self-employed. Report each crew member’s share of proceeds from boats with normally fewer than 10 crew members. Recipients report these amounts on Schedule C, C-EZ, or Schedule SE (Form 1040) as explained in Publication 334.
Step 8: Report Box 6 Medical and Health Care Payments
Enter payments of $600 or more made to physicians or other medical and health care service providers. This includes payments by medical insurers under health insurance programs.
Step 9: Report Box 7 Nonemployee Compensation
Enter cash payments of $600 or more for services performed by nonemployees, including fees, commissions, and prizes for services rendered. Include fish purchases for cash and oil and gas payments for working interests. If the recipient’s net self-employment income exceeds $400, they must complete Schedule SE (Form 1040). Recipients who believe they were misclassified as independent contractors rather than employees may report this amount on Form 1040, line 7 (or Form 1040NR, line 8), and must file Form 8919 to dispute their worker classification. Otherwise, recipients generally report nonemployee compensation on Schedule C, C-EZ, or F.
Step 10: Mark Box 9 Direct Sales Checkbox
Check this box if you made direct sales of $5,000 or more of consumer products to the recipient on a buy-sell, deposit-commission, or similar basis for resale anywhere other than in a permanent retail establishment. No dollar amount is required in this checkbox field. Recipients typically report income from these sales on Schedule C or C-EZ (Form 1040).
Step 11: Report Boxes 15a and 15b Section 409A Plans
Box 15a reports current-year deferrals under a nonqualified deferred compensation (NQDC) plan subject to Section 409A requirements, plus earnings on current and prior-year deferrals. Box 15b reports Section 409A noncompliant amounts that are also included in Box 7. Amounts in Box 15b are subject to substantial additional tax that recipients must calculate and report on Form 1040. These boxes have been part of Form 1099-MISC since 2005, when Section 409A became effective, not newly introduced in 2010.
Step 12: Furnish Recipient Copies
Furnish Copy B to each recipient by January 31, 2011. If you are reporting amounts only in Box 8 (substitute payments instead of dividends or interest) or Box 14 (gross proceeds paid to an attorney), you have an extended deadline of February 15, 2011, to furnish the recipient copy. Ensure recipients receive their copies promptly to allow proper tax return preparation.
Step 13: File with the IRS
File Copy A with the IRS by February 28, 2011, if filing on paper, or by March 31, 2011, if filing electronically. Electronic filing is required if you file 250 or more information returns. Use software that conforms to the specifications in Publication 1220 for electronic filing. Do not submit forms printed from the IRS website directly to the IRS, as they cannot be scanned properly during processing.
Step 14: Maintain Proper Documentation
Retain copies of all filed Forms 1099-MISC and supporting documentation for at least three years. Keep records showing the date, amount, and nature of each payment. Maintain copies of completed Forms W-9 received from recipients to substantiate correct taxpayer identification numbers and backup withholding exemption status.
Step 15: Correct Errors Promptly
If you discover errors after filing, prepare corrected Forms 1099-MISC by checking the “CORRECTED” box at the top of the form. File the corrected form with the IRS and furnish a corrected copy to the recipient as soon as possible. Include an explanation of the correction when furnishing the corrected recipient copy.
Year-Specific Information for 2010
Section 409A Reporting Requirements
Boxes 15a and 15b have been required on Form 1099-MISC since 2005, when Section 409A of the Internal Revenue Code became effective. Box 15a reports deferrals under compliant NQDC plans, while Box 15b reports noncompliant deferrals subject to substantial additional tax. This bifurcated reporting structure enables the IRS to monitor compliance with Section 409A requirements and ensures the accurate assessment of extra taxes on noncompliant plans.
Recipient Identification Number Truncation
The 2010 instructions clarified that payers may truncate recipient identification numbers on Copy B and other recipient copies, displaying only the last four digits of the SSN, ITIN, or ATIN for privacy protection. However, payers must always report the complete identification number to the IRS on Copy A and to state and local tax agencies as required by law. This truncation provision helps protect recipients from identity theft while maintaining complete reporting to tax authorities.
Backup Withholding Rate
For the 2010 tax year, the backup withholding rate remained at 28% for recipients who failed to provide valid taxpayer identification numbers on Form W-9. This rate applies to reportable payments in Boxes 1, 2, 3, 5, 6, 7 (except for fish purchases made in cash), 8, 10, and 14. Payers must withhold at this rate when required and report the withheld amounts in Box 4.
Extended Deadline for Specific Boxes
The 2010 instructions established a February 15, 2011, extended deadline for furnishing Copy B to recipients when the form reports amounts only in Box 8 (substitute payments instead of dividends or interest) or Box 14 (gross proceeds paid to an attorney). This extended deadline differs from the standard January 31 deadline and provides additional time for complex settlement and broker transaction reporting.
Important Reminders
Report payments only when made in the course of your trade or business. Personal expenses are not reportable on Form 1099-MISC. Generally, payments to corporations are exempt from reporting, except for medical and healthcare costs, cash purchases of fish, attorney fees, gross proceeds paid to attorneys, and substitute payments made instead of dividends or tax-exempt interest.
Ensure accuracy in all reported amounts and recipient information. Penalties apply for failure to file correct information returns, failure to furnish correct payee statements, and intentional disregard of filing requirements. The penalty amounts vary based on how late you file and whether the failure was willful.
Use Form W-9 to request taxpayer identification numbers and certification from recipients before making reportable payments. Properly completed Forms W-9 protect you from backup withholding obligations and provide the necessary information for accurate Form 1099-MISC preparation.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
