Form 1099-MISC 2021 Filing Checklist
Purpose and Overview
Form 1099-MISC reports miscellaneous income paid to nonemployees during the tax year. This includes rents, royalties, medical payments, attorney proceeds, and other specified payments. The form also tracks deferred compensation under Section 409A, requiring careful attention to reporting requirements and deadlines.
Filing Requirements
You must file Form 1099-MISC when you pay the following amounts in the course of your trade or business:
- At least $10 in royalties or broker payments instead of dividends or tax-exempt interest
- At least $600 in rents, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, or gross proceeds paid to an attorney
- Any amount of federal income tax withheld under backup withholding rules, regardless of payment amount
- Section 409A deferrals (optional reporting)
- Nonqualified deferred compensation that fails to meet Section 409A requirements
Step-by-Step Filing Checklist
Step 1: Obtain Official Scannable Forms
Order official red-ink scannable Copy A from IRS.gov/orderforms or from an approved vendor. Do not print Copy A from the IRS website, as downloaded versions are not scannable and will result in penalties under IRC Section 6721. Copies B, C, 1, and 2 may be printed from the IRS website for furnishing to recipients.
Step 2: Verify Payer Information
Enter your complete Taxpayer Identification Number and legal business name exactly as registered with the IRS. This information must appear identically on all copies before distribution to ensure proper IRS matching and avoid processing delays.
Step 3: Collect and Verify Recipient TINs
Obtain each recipient’s complete TIN using Form W-9. Acceptable TINs include Social Security Numbers, Individual Taxpayer Identification Numbers, Adoption Taxpayer Identification Numbers, or Employer Identification Numbers. For recipient copies, you may truncate the TIN to show only the last four digits, but you must report the full TIN to the IRS on Copy A.
Step 4: Report Box 1 Rental Income Correctly
Report rental payments of $600 or more in Box 1. This includes real estate rentals, equipment rentals, and pasture rentals. If you pay rent to a real estate agent or property manager, you are not required to report it, but the agent or manager must report the rent paid to the property owner. Recipients generally report Box 1 amounts on Schedule E unless they provide significant services to tenants, sell real estate as a business activity, or rent personal property as a business, in which case Schedule C applies.
Step 5: Complete Box 2 for Royalty Payments
Report gross royalty payments of $10 or more. Include royalties from oil, gas, mineral properties, patents, copyrights, and trademarks. Report amounts before reduction for severance taxes or other withholdings. Do not report surface royalties in Box 2; these belong in Box 1. Timber royalties under pay-as-cut contracts should be reported on Form 1099-S instead.
Step 6: Report Box 3 Other Income
Enter miscellaneous income of $600 or more that does not fit in other boxes. This includes prizes and awards not for services performed, medical research study payments, punitive damages, Indian gaming profits paid to tribal members, and termination payments to former self-employed insurance salespeople meeting specific IRS criteria. Report federal income tax withheld from these payments in Box 4.
Step 7: Apply Backup Withholding in Box 4
Withhold and report federal income tax when required under backup withholding rules. Backup withholding applies when recipients fail to furnish their TIN, provide an incorrect TIN, underreport interest or dividend income, or fail to certify they are not subject to backup withholding. The current backup withholding rate and detailed requirements appear in the General Instructions for Certain Information Returns.
Step 8: Handle Box 7 Direct Sales Reporting
Check Box 7 if you made direct sales of consumer products totaling $5,000 or more to a buyer for resale on a buy-sell, deposit-commission, or other commission basis anywhere other than a permanent retail establishment. Do not enter a dollar amount in this checkbox. You may use either Box 7 on Form 1099-MISC or Box 2 on Form 1099-NEC for this reporting. If you choose Form 1099-NEC, you must file it by January 31 of the following year.
Step 9: Report Box 10 Attorney Proceeds
Report gross proceeds of $600 or more paid to attorneys in connection with legal services. This requirement applies to payments made to the attorney but not for the attorney’s services, such as settlement payments. Report these amounts whether the attorney is the exclusive payee or shares the payment with a claimant. The attorney reporting exemption for corporations does not apply to legal services, so you must report payments to law firms regardless of business structure.
Step 10: Understand Box 12 Section 409A Deferrals
Box 12 reporting is optional. If you choose to complete it, enter the total amount deferred during the year of at least $600 under all non-qualified deferred compensation plans. Include both current-year deferrals and earnings on prior-year deferrals. This box serves informational purposes and does not indicate tax compliance or noncompliance. Most payers leave this box blank, as the IRS does not require completion.
Step 11: Report Box 14 Noncompliant Deferred Compensation
Enter all amounts that become includible in income under Section 409A because the nonqualified deferred compensation plan failed to satisfy Section 409A requirements. Include both deferred amounts and earnings. Do not report amounts already included on prior-year forms or amounts subject to a substantial risk of forfeiture. Recipients must report these amounts on Schedule 2, Line 8 of Form 1040 or Form 1040-SR, which calculates a 20 percent additional tax plus interest on the includible compensation.
Step 12: Complete State Tax Information
Use Boxes 15 through 17 for state tax reporting if you participate in the Combined Federal/State Filing Program or if your state requires it. Box 15 reports state income tax withheld, Box 16 shows the state name and your state identification number, and Box 17 reports the amount of state payment. Keep information for each state separated by the dash line if reporting for two states.
Step 13: File Forms with the IRS
Submit Form 1099-MISC to the IRS by February 28, 2022, if filing on paper, or by March 31, 2022, if filing electronically. Attach Copy A to Form 1096 when filing paper returns. Electronic filing is required if you file 250 or more information returns. Check for updated electronic filing thresholds, as the IRS may reduce this requirement for future tax years.
Step 14: Furnish Statements to Recipients
Provide Copy B to recipients by January 31, 2022. The deadline extends to February 15, 2022, only when you report amounts in Box 8 (substitute payments instead of dividends or interest) or Box 10 (gross proceeds paid to an attorney). If you report amounts in other boxes along with Box 8 or Box 10 payments, the February 15 deadline applies to the entire form. You may furnish statements electronically with proper recipient consent.
Step 15: File Corrected Forms When Necessary
If you discover errors after filing, submit corrected forms promptly. For paper corrections, mark the CORRECTED checkbox and file by February 28, 2022, for paper submissions or March 31, 2022, for electronic filing. Do not check the VOID box on corrections, as this instructs IRS scanning equipment to ignore the form entirely. Corrected forms must include all information from the original return with updated amounts or details in the corrected fields.
Important 2021 Considerations
Section 409A Reporting Requirements
The distinction between Box 12 and Box 14 remains critical for 2021 reporting. Box 12 provides optional tracking of deferrals under any nonqualified plan, while Box 14 specifically captures amounts that become taxable due to plan noncompliance with Section 409A. Amounts reported in Box 14 trigger significant tax consequences for recipients, including a 20 percent additional tax calculated on Schedule 2 of Form 1040 or Form 1040-SR.
Extended Furnishing Deadline Details
The February 15 extended deadline for recipient statements applies only when the form contains reportable amounts in Box 8 or Box 10. If your Form 1099-MISC reports payments in other boxes but does not include Box 8 or Box 10 amounts, you must furnish statements by the standard January 31 deadline. Plan your distribution schedule accordingly to ensure compliance with regulations.
Scannable Form Requirements
The IRS strictly enforces scannable Copy A requirements for 2021. Forms printed from the IRS website often use incorrect ink and paper specifications, rendering them unreadable by IRS scanning equipment. Filing non-scannable forms subjects you to penalties under IRC Section 6721, which can reach $310 per form depending on when you correct the error. Always use officially printed red-ink forms or file electronically to avoid these penalties.
FATCA Filing Requirement
If you check the FATCA filing requirement box, you indicate that you are satisfying Chapter 4 account reporting obligations. U.S. payers reporting on Form 1099-MISC as part of chapter 4 compliance should mark this box. Foreign financial institutions reporting U.S. accounts under certain elections must also check this box. When the FATCA box is checked, you must include an account number on the form. Recipients may have separate Form 8938 filing requirements based on specified thresholds for foreign financial assets.
Coordination with Form 1099-NEC
For 2021, nonemployee compensation is reported on the separate Form 1099-NEC, which has a January 31 filing deadline with the IRS. Form 1099-MISC retains reporting for rents, royalties, and other miscellaneous payments with later filing deadlines. You may report direct sales of $5,000 or more on either Form 1099-MISC Box 7 or Form 1099-NEC Box 2, but choosing Form 1099-NEC requires meeting its earlier January 31 IRS filing deadline.
Penalties and Compliance
Missing deadlines or filing incorrect information carries significant penalties. The penalty structure depends on how quickly you correct errors, ranging from $60 per form if corrected within 30 days to $310 per form if corrected after August 1 or not corrected at all. Intentional disregard of filing requirements results in penalties of at least $630 per day, with no maximum limit. Electronic filing helps reduce errors and ensures timely submission while avoiding penalties for non-scannable forms.
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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.
