Form 1099-MISC 2014 Checklist
Purpose
Form 1099-MISC reports miscellaneous income, including rents, royalties, nonemployee compensation, fishing boat proceeds, medical payments, crop insurance proceeds, and Section 409A deferrals. For 2014, payers must furnish Copy B to recipients by February 2, 2015 (extended to February 17, 2015 if boxes 8 or 14 contain amounts), and file Copy A with the IRS by March 2, 2015 (March 31, 2015 if filed electronically).
Filing Requirements
Step 1: Verify Payer Information
Confirm your business name, complete street address, employer identification number, and telephone number match IRS records exactly. All payer identification must appear accurately on all copies (A, B, C, and state copies). Incorrect information can delay processing and may result in penalties.
Step 2: Obtain and Enter Recipient Identification Numbers
Enter the recipient’s taxpayer identification number (SSN, ITIN, or ATIN) completely on Copy A filed with the IRS. Copy B furnished to recipients may display only the last four digits for privacy protection. Use Form W-9 to collect TINs before making payments. Missing or incorrect TINs trigger backup withholding requirements.
Step 3: Report Rents in Box 1
Report $600 or more paid for real estate rentals, machine rentals, and pasture rentals. Do not report payments made to real estate agents for office space rentals; the agent is required to report rent paid to the property owner. Include rental payments only if the recipient provided no significant services to tenants and did not sell real estate as a business. For services combined with rentals, allocate amounts appropriately between boxes 1 and 7.
Step 4: Report Royalties in Box 2
Report gross royalty payments of $10 or more from oil, gas, mineral properties, patents, copyrights, and trademarks. Report amounts before reduction for severance taxes or other withholdings. Do not include surface royalties (report in box 1) or working interest payments (report in box 7). Timber royalties under pay-as-cut contracts belong on Form 1099-S, not Form 1099-MISC.
Step 5: Complete Box 3 for Other Income
Report $600 or more in miscellaneous income not reportable elsewhere, including deceased employee wage payments to beneficiaries, Indian gaming profits to tribal members, prizes and awards for non-services, medical research study payments, and termination payments to former self-employed insurance salespeople meeting specific criteria. Report the gross amount before any tax withholding.
Step 6: Apply Backup Withholding in Box 4
Withhold and report 28% backup withholding when recipients fail to furnish valid taxpayer identification numbers on Form W-9. Apply backup withholding to amounts in boxes 1, 2, 3, 5 (cash payments only), 6, 7 (except for cash purchases of fish), 8, 10, and 14. Also, report any income tax withheld from Indian gaming profits paid to tribal members.
Step 7: Report Fishing Boat Proceeds in Box 5
Enter each crew member’s share of proceeds from fishing boats with normally fewer than 10 crew members. Include the individual’s share of catch sales or the fair market value of in-kind distributions. Report cash payments of up to $100 per trip for additional duties, such as mate, engineer, or cook. Do not report amounts already reportable as wages on Form W-2.
Step 8: Report Medical and Health Care Payments in Box 6
Report $600 or more paid to physicians and medical service providers in the course of your trade or business. Include payments by insurers under health, accident, and sickness insurance programs. The corporate exemption does not apply to medical payments; report payments to corporations providing medical services. Do not report payments to tax-exempt hospitals, government-operated hospitals, or pharmacies for prescription drugs.
Step 9: Complete Box 7 for Nonemployee Compensation
Report $600 or more paid to nonemployees for services performed in your trade or business. Include fees, commissions, prizes, awards, oil and gas working interest payments, and cash fish purchases. Federal executive agencies must report all payments to vendors for services, including those to corporations. If the recipient disputes employee classification, they must file Form 8919; do not withhold employment taxes on box 7 amounts reported as nonemployee compensation.
Step 10: Report Section 409A Nonqualified Deferred Compensation
Complete Box 15a to report current-year deferrals under nonqualified deferred compensation plans subject to Section 409A requirements, including earnings on deferrals. Full Box 15b to report all amounts from plans failing to meet Section 409A requirements. Box 15b amounts must also be included in Box 7 and are subject to an additional 20% excise tax plus penalty interest, which recipients report separately on their returns.
Step 11: Report Substitute Payments and Attorney Gross Proceeds
Enter in Box 8 aggregate substitute payments of $10 or more received by brokers instead of dividends or tax-exempt interest from securities lending. Enter in Box 14 gross proceeds of $600 or more paid to attorneys in connection with legal services, including settlement payments. Report the entire payment amount; recipients determine the taxable portion after deducting expenses. The corporate exemption does not apply to fees for legal services.
Step 12: Prepare State Reporting
Complete boxes 16, 17, and 18 for any state or local income tax withheld from payments. Enter withholding amounts, your state identification number, and state income amounts. Furnish state copies to recipients required to file state returns. State reporting requirements vary by jurisdiction.
Step 13: File Corrected Returns When Necessary
Check the CORRECTED box only when filing to replace a previously filed Form 1099-MISC for the same tax year and recipient. Include all correct information, not just the changed amounts. Do not file corrected forms before the original filing due date. Use the same format and procedures as original returns.
Step 14: Submit Forms and Maintain Records
Prepare Form 1096 as the annual summary transmittal with totals for all 1099-MISC forms. Use only official IRS-supplied scannable forms for Copy A; forms downloaded from the IRS website cannot be processed. File Copy A with Form 1096 by March 2, 2015 (March 31, 2015 if electronic). Keep Copy C for your records, along with documentation supporting all reported amounts for at least three years.
Step 15: Furnish Recipient Copies by Deadline
Provide Copy B to each recipient by February 2, 2015. If reporting substitute payments in Box 8 or gross proceeds to attorneys in Box 14, the deadline extends to February 17, 2015. Furnish statements showing all required information, including payer details, recipient identification, payment amounts, and any federal or state tax withheld. Late or missing statements result in penalties.
Key 2014 Updates
- Two-Tier Recipient Deadline: The 2014 tax year introduced a split deadline structure. Most Form 1099-MISC recipients must receive Copy B by February 2, 2015. However, payers reporting substitute payments instead of dividends or interest (Box 8) or gross proceeds paid to attorneys (Box 14) receive an automatic 15-day extension to February 17, 2015.
- Section 409A Dual Reporting: Boxes 15a and 15b separately track compliance with non-qualified deferred compensation plans. Box 15a displays current-year deferrals and earnings under compliant plans that are subject to Section 409A requirements. Box 15b captures income from noncompliant plans that failed Section 409A requirements. Amounts in Box 15b must also appear in Box 7 and trigger an additional 20% excise tax plus penalty interest calculated on the vesting date.
- Enhanced Backup Withholding: When recipients fail to furnish taxpayer identification numbers on Form W-9, payers must backup withhold at 28% on reportable payments. Report withheld amounts in Box 4. Recipients who do not provide TINs may face potential penalties under Section 6723, and payers must continue withholding until they receive valid identification.
- Direct Sales Reporting: Box 9 serves as a checkbox indicator for direct sales of consumer products totaling $5,000 or more for resale purposes. No dollar amount appears in this box. Recipients report all income from such sales on Schedule C, regardless of the actual amount received. This requirement applies to direct sales outside permanent retail establishments.
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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.
