Form 1099-MISC Filing Checklist for Tax Year 2012
Purpose and Overview
Form 1099-MISC reports miscellaneous income, including rents, royalties, nonemployee compensation, fishing boat proceeds, medical payments, and Section 409A deferrals. For tax year 2012, the IRS introduced enhanced reporting requirements for Section 409A nonqualified deferred compensation plans, distinguishing between compliant deferrals (Box 15a) and noncompliant income (Box 15b).
Key Deadlines:
- Copy B to recipients: January 31, 2013 (February 15, 2013 if Box 8 or Box 14 contains reportable amounts)
- Copy A to IRS (paper): February 28, 2013
- Copy A to IRS (electronic): April 1, 2013
Filing Steps
Step 1: Verify Payer Information
Confirm that all payer details are accurate across all copies (A, B, C, and 1). Required information includes:
- Legal name of payer entity
- Federal employer identification number (EIN)
- Complete street address (no P.O. boxes for street address line)
- City, state, and ZIP code
- Telephone number
Ensure all entries match IRS records for your entity to avoid processing delays.
Step 2: Obtain and Verify Recipient TIN
Obtain the recipient’s correct taxpayer identification number using Form W-9 or equivalent documentation. Acceptable TINs include:
- Social Security Number (SSN)
- Individual Taxpayer Identification Number (ITIN)
- Adoption Taxpayer Identification Number (ATIN)
- Employer Identification Number (EIN) for business entities
Copy B provided to recipients may display only the last four digits for privacy protection, but you must report the complete TIN to the IRS and state authorities on Copies A and 1.
Step 3: Report Rents in Box 1
Enter amounts of $600 or more for rental payments, including:
- Real estate office space rentals
- Machine and equipment rentals
- Pasture or land rentals
Do not report rental payments made to real estate agents in Box 1. However, real estate agents must use Form 1099-MISC to report rent payments forwarded to property owners.
Step 4: Report Royalties in Box 2
Enter gross royalty payments of $10 or more from:
- Oil, gas, or mineral properties (before reduction for severance taxes)
- Copyrights and patents
- Intangible property, such as trademarks and trade names
Do not report working interest payments in Box 2; these belong in Box 7 as nonemployee compensation.
Step 5: Complete Box 3 for Other Income
Report miscellaneous income of $600 or more that is not covered by other boxes, including:
- Prizes and awards (not for services performed)
- Deceased employee wage payments to estates or beneficiaries
- Indian gaming profits are paid to tribal members
- Medical research study participation payments
- Termination payments to former self-employed insurance salespeople (if meeting all IRS criteria)
- Taxable damages and settlements
Step 6: Report Fishing Boat Proceeds in Box 5
Complete Box 5 only if the fishing boat operator considers the recipient self-employed. Include:
- Individual’s share of proceeds from catch sales
- Fair market value of distributions in kind
- Cash payments up to $100 per trip, contingent on minimum catch for additional duties
This applies to fishing boats with normally fewer than 10 crew members. Recipients must report this income on Schedule C and file Schedule SE if net self-employment income exceeds the threshold.
Step 7: Report Medical and Health Care Payments in Box 6
Enter payments of $600 or more made to physicians and medical service providers in the course of your trade or business. Include:
- Payments to individual practitioners
- Payments to corporations providing medical services (corporate exemption does not apply to medical payments)
- Payments under health insurance programs
Do not report payments to tax-exempt hospitals or government-operated medical facilities.
Step 8: Complete Box 7 for Nonemployee Compensation
Report nonemployee compensation of $600 or more, including:
- Professional service fees to attorneys, accountants, architects, and contractors
- Commissions paid to nonemployee salespersons
- Prizes and awards for services performed
- Directors’ fees
- Fish purchases for cash
- Working interest oil and gas payments
- Federal executive agency payments to vendors (including corporations)
If Box 7 includes Section 409A noncompliant deferrals, ensure the Box 15b amount is also reported and included in the Box 7 total.
Step 9: Report Substitute Payments in Box 8
Enter substitute payments instead of dividends or tax-exempt interest totaling $10 or more. These payments result from securities lending transactions where your broker received payments on your behalf.
Step 10: Check Box 9 for Direct Sales
Mark the checkbox in Box 9 if you made direct sales of $5,000 or more of consumer products to the recipient for resale on a buy-sell, deposit-commission, or similar basis. Do not enter a dollar amount—only check the box. The recipient reports all income from such sales on Schedule C, regardless of the threshold amount.
Step 11: Report Attorney Payments in Box 14
Enter gross proceeds of $600 or more paid to attorneys in connection with legal services. Report the total amount paid, including:
- Settlement payments made to attorneys
- Legal fees, regardless of whether services were provided to you
- Payments where the attorney is the sole or joint payee
The attorney is responsible for reporting only the taxable portion as income; you must report the gross amount.
Step 12: Complete Section 409A Boxes (15a and 15b)
Box 15a (Optional Reporting): You may report current-year deferrals under a compliant nonqualified deferred compensation plan plus accumulated earnings on current and prior year deferrals. This box is optional for payers.
Box 15b (Required Reporting): Report income from nonqualified deferred compensation plans that fail to meet Section 409A requirements. This amount must also be included in Box 7. Recipients owe regular income tax plus a 20% additional tax under Section 409A on amounts reported in Box 15b.
Step 13: Report Golden Parachute Payments in Box 13
Enter excess golden parachute payments—the amount exceeding the recipient’s base amount (average annual compensation over the most recent five tax years). These payments are subject to a 20% excise tax under IRC Section 4999. Recipients report this amount according to the Form 1040 instructions.
Step 14: Complete Withholding Boxes (4, 16, 17, 18)
Box 4: Enter federal income tax withheld through backup withholding or withholding on Indian gaming profits.
Boxes 16–18: Complete only if state or local income tax was withheld. Report state withholding amounts on Copy 2 for state filing when required by the recipient’s state.
Step 15: Furnish Copies and File with IRS
Furnish to Recipients:
- Provide Copy B by January 31, 2013
- Extended deadline: February 15, 2013, if Box 8 or Box 14 contains reportable amounts
File with IRS:
- Submit Copy A with Form 1096 (transmittal summary) by February 28, 2013, for paper filing
- Submit electronically by April 1, 2013, using the specifications in Publication 1220
Important Reminders for 2012
Section 409A Reporting Requirements
Box 15a and Box 15b reporting distinguishes between compliant and noncompliant nonqualified deferred compensation plans. Amounts in Box 15b trigger a 20% additional tax (not penalty tax) for recipients under IRC Section 409A(a)(1)(B), in addition to regular income tax.
Extended Recipient Deadline
Payers reporting amounts in Box 8 (substitute payments) or Box 14 (gross proceeds to attorneys) receive an automatic extension until February 15, 2013, to furnish Copy B to recipients, allowing additional time for payment reconciliation.
Form Source Requirements
You cannot file Copy A forms printed from the IRS website. Official forms must be obtained from the IRS directly or through approved third-party vendors to ensure proper scanning and processing capabilities.
Direct Sales Checkbox Reporting
Box 9 requires only a checkbox for direct sales of $5,000 or more—no dollar amount entry is needed. Recipients must report all income from direct sales activities on Schedule C, regardless of whether the $5,000 threshold was met.
TIN Truncation for Privacy
For tax years 2011 and 2012, Notice 2011-38 allows filers to truncate recipient identification numbers on Copy B (showing only the last four digits). Still, complete TINs must be reported to the IRS on Copy A and to state authorities on Copy 1.
Form 1040 Reporting Integration
The 2012 Form 1040 instructions include specific line references for recipients to report Box 13 (excess golden parachute payments) and Box 15b (Section 409A noncompliant income). Ensure recipients receive clear guidance on proper reporting locations.
This checklist provides comprehensive guidance for accurately preparing and filing Form 1099-MISC for tax year 2012, ensuring compliance with IRS requirements and proper reporting of all miscellaneous income categories.
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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.
