2011 Form 1099-MISC Checklist
Purpose
The 2011 Form 1099-MISC reports miscellaneous income, including nonemployee compensation, rents, royalties, fishing boat proceeds, medical payments, and deferrals from Section 409A plans. For 2011, payers must distinguish between Section 409A income that is currently taxable and current-year deferrals, reflecting the post-2008 nonqualified deferred compensation compliance requirements.
Filing Steps
Step 1: Verify Recipient and Payer Information
Confirm the recipient’s legal name, complete street address, including apartment number, city, state, ZIP code, and TIN, to IRS records. Ensure the payer’s name, address, and Federal ID are complete and accurate, as per the 2011 instructions.
Step 2: Report Rents in Box 1
Enter rents of $600 or more in Box 1 only if no significant tenant services were provided. If services were rendered or personal property was rented as part of a business operation, report the income on Schedule C instead. Public housing agencies must report rental assistance payments made to property owners.
Step 3: Report Royalties in Box 2
Report royalties of $10 or more from oil, gas, mineral properties, copyrights, and patents in Box 2. For royalty treatment of timber, coal, and iron ore, consult Publication 544. Report gross royalties before reduction for severance and other taxes that may have been withheld and paid.
Step 4: Report Other Income in Box 3
Enter other income of $600 or more that is required to be reported, but is not reportable in different boxes. This includes prizes and awards not for services performed, payments to the estates or beneficiaries of deceased employees, Indian gaming profits distributed to tribal members, and termination payments to former self-employed insurance salespeople who meet specific requirements. Report damages for nonphysical injuries or sickness unless specifically excluded.
Step 5: Report Federal Income Tax Withheld in Box 4
Enter backup withholding amounts in Box 4. Backup withholding at 28% applies when recipients fail to furnish their taxpayer identification number. Also, enter any income tax withheld from payments to members of Indian tribes from net revenues of class II or class III gaming activities.
Step 6: Report Fishing Boat Proceeds in Box 5
Enter each crew member’s share of proceeds from the sale of a catch or the fair market value of distributions in kind for fishing boats with normally fewer than 10 crew members. Include contingent cash payments of up to $100 per trip for additional duties such as mate, engineer, or cook, where such costs are traditional in the industry.
Step 7: Report Medical and Health Care Payments in Box 6
Enter payments of $600 or more made in the course of your trade or business to each physician or other supplier or provider of medical or health care services. Include payments made by insurers under health, accident, and sickness insurance programs. If payment is made to a corporation providing medical services, list the corporation as the recipient. You are not required to report payments to pharmacies for prescription drugs or to tax-exempt hospitals.
Step 8: Report Nonemployee Compensation in Box 7
Enter nonemployee compensation of $600 or more. Include fees, commissions, prizes, and awards for services performed as a nonemployee, and cash payments for fish purchases. Include oil and gas payments for a working interest, whether or not services are performed. Report attorneys’ fees, payments to section 530 workers, directors’ fees, and commissions paid to lottery ticket sales agents. For Section 409A income reported in Box 15b, include all deferrals plus earnings that are includible in gross income because the nonqualified deferred compensation plan fails to satisfy Section 409A requirements.
Step 9: Report Substitute Payments in Box 8
Enter aggregate payments of at least $10 received by a broker for a customer instead of dividends or tax-exempt interest as a result of a loan of a customer’s securities. For this purpose, a customer includes an individual, trust, estate, partnership, association, company, or corporation.
Step 10: Check Box 9 for Direct Sales
Check Box 9 if direct sales of consumer products totaling $5,000 or more were made to the recipient for resale on a buy-sell, deposit-commission, or other basis. No dollar amount entry is required—only check the box. The recipient does not need to receive a statement on the official form for these direct sales.
Step 11: Note Reserved Boxes 11 and 12
Boxes 11 and 12 are designated as Reserved. Make no entries in these boxes per the 2011 instructions.
Step 12: Report Excess Golden Parachute Payments in Box 13
Report total compensation of excess golden parachute payments subject to a 20% excise tax in Box 13. Golden parachute payments are compensation to disqualified individuals contingent on a change in corporate ownership or control, with an aggregate present value of at least three times the individual’s base amount. Recipients must report this tax on Form 1040 per that year’s instructions.
Step 13: Report Gross Proceeds Paid to Attorneys in Box 14
Enter gross proceeds of $600 or more paid to an attorney in connection with legal services, regardless of whether the services are performed for the payer. This includes payments made in settlement agreements. Report these payments even if made to corporations providing legal services.
Step 14: Complete Section 409A Boxes 15a and 15b
Box 15a completion is optional. If you choose to complete it, enter the total amount deferred during the year of at least $600 for the nonemployee under all nonqualified plans. Deferrals during the year include earnings on current-year and prior-year deferrals. For details, see Notice 2008-115.
Box 15b is required when applicable. Enter all amounts deferred, including earnings that are includible in income under Section 409A because the nonqualified deferred compensation plan fails to satisfy Section 409A requirements. This income is subject to a substantial additional tax of 20% plus premium interest under Section 409A. Amounts in Box 15b must also be included in Box 7 and are generally subject to self-employment tax.
Step 15: Complete State Tax Information in Boxes 16–18
Enter state income tax withheld in Box 16. Enter the state or payer’s state identification number in Box 17. Enter the state income amount in Box 18. Provide all three boxes if any state withholding occurred.
Filing Deadlines and Procedures
Furnish Copy B to Recipients
Provide Copy B to recipients by January 31, 2012. If reporting payments in Box 8 or Box 14, the due date is extended to February 15, 2012.
File Copy A with the IRS
If you are filing on paper, submit Copy A to the IRS by February 28, 2012. If filing electronically, the due date is April 2, 2012. Electronic filing is required if you file 250 or more Forms 1099-MISC. The IRS encourages electronic filing even if you file fewer than 250 returns.
Use Form 1096 as Transmittal
Submit Form 1096 as a cover sheet when filing Copy A on paper with the IRS. Do not cut or separate forms that are printed two or three to a page. Please submit the entire page, even if some fields are blank. Do not staple forms together.
Mark Corrected Box When Amending
Check the Corrected box only if amending a previously filed 2011 Form 1099-MISC. Do not file a corrected form if you are furnishing the form for the first time. When correcting, complete all information on the form and submit the entire page with Form 1096.
Important Filing Requirements
Use Official IRS Forms or Approved Substitutes
Because the IRS processes paper forms by machine using optical character recognition equipment, you cannot file the Form 1096 or Copy A of Form 1099-MISC that you print from the IRS website or download from the DVD. You must order official scannable forms by calling 1-800-TAX-FORM or use software that generates files according to the specifications in Publication 1220. Copy B from the IRS website may be used for recipient statements. No photocopies of any forms are acceptable for filing with the IRS.
Obtain Taxpayer Identification Numbers
To report payments on Form 1099-MISC, you must obtain the recipient’s taxpayer identification number. You may use Form W-9 to get this information. If the recipient fails to provide a valid TIN, you must backup withhold at 28% on reportable payments. Recipients should reference Form W-9 and Publication 505 to avoid withholding errors.
Understand Reporting Thresholds
File Form 1099-MISC for each person to whom you paid at least $10 in royalties or broker payments instead of dividends or tax-exempt interest, or at least $600 in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish, or generally cash paid from a notional principal contract.
File for any fishing boat proceeds or gross proceeds of $600 or more paid to an attorney. You must also file if you withheld any federal income tax under backup withholding rules, regardless of the payment amount.
Report Payments to Corporations When Required
Generally, payments to corporations are not reportable on Form 1099-MISC. However, you must report medical and health care expenses, fish purchases for cash, attorneys’ fees, gross proceeds paid to attorneys, substitute payments instead of dividends or tax-exempt interest, and payments by federal executive agencies for services to corporations. The exemption for corporations does not apply to these specific types of payments.
Maintain Proper Records
Keep copies of information returns filed with the IRS or maintain the ability to reconstruct the data for at least three years from the due date of the returns. Keep copies for four years if backup withholding was imposed. The IRS strongly encourages quality review of data before filing to prevent erroneous notices from being mailed to recipients.
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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.
