What is a 1099-MISC Form?
Every year, business owners have the task of reporting wages for work preformed. Usually the person receiving a weekly paycheck is considered an employee and receives a W-2 tax form, but when it comes to your attorney, the person who designed your website, or cleans your offices, the rules are different.
The IRS’ Form 1099-MISC is a tax form used to report an annual summary of all non-employee compensation a business or trade has paid out, also known as “miscellaneous income”. This form covers a wide range of compensation types. According to the IRS, 1099-MISC forms should report payments to individuals made during the fiscal year which include:
- $10 or more in royalties or broker payments from dividends or tax-exempt interest
- $600 or more in rent, services, prizes, awards or other payments
- $600 or more in medical and health care payments, crop insurance proceeds, or notional principal contracts paid from an individual, partnership or estate
- $600 or more in cash payments for fish or other aquatic life made to someone in the fishing trade, or any amount made from the proceeds of a fishing boat sale, or
- $600 or more paid to an attorney
While there are a lot of different types of compensation a 1099-MISC form is used to report, by far the most common usage of the 1099-MISC form is by small businesses reporting compensation paid to independent contractors.