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IRS Tax Form 1099-MISC – Instructions for Small Businesses & Contractors

By Kira Botkin

In an effort to help make filing taxes easier this year, we are breaking down the various IRS tax forms to help you know if you need them, and how to use them.

1099 misc tax formIf you’re a freelancer or run a small business and use independent contractors, you’re probably familiar with the 1099-MISC form. This form is used to report income to freelancers, independent contractors, and other self-employed individuals who, as their own employer, are generally responsible for paying the employer’s and employee’s portion of taxes.

Thanks to its versatility, businesses and clients use the 1099-MISC form for many different kinds of transactions. It’s very useful, but also potentially confusing because of all the data it can hold.

Understanding the 1099-MISC Boxes

A 1099-MISC form is a catchall for all miscellaneous income that you provided or received. In an attempt to get all the necessary information for any situation, the IRS uses 18 boxes to collect data. If you’re a payer, you need to know which fields to fill out. And if you’re filling your tax return, you’ll want to know what your numbers mean.

1099 misc tax form

1. Rents. If you rented office space, heavy machinery, soda machines, or live tigers from another company, total up the year’s payments and list them here.

2. Royalties. This includes all royalty payments, such as those from oil or mineral-producing properties.

3. Other income. This can include prizes (but not gambling winnings, as they have their own 1099 variant), damages from a lawsuit, or payments for participating in medical research.

4. Federal income tax withheld. This section is utilized when as a business owner you have to send a 1099 to an independent contractor who has refused to provide his or her W-9 and tax identification number. Just to be on the safe side, the Federal Government requires you withhold 28% of the money you pay to that person and send it to the IRS. In all other situations, it’s up to the independent contractor who receives the 1099 to figure out how to pay their taxes. See the Form 1099-MISC instructions for further explanation on what income you can withhold taxes on.

5. Fishing boat proceeds. Here you report the monetary value of the catch shares that the individual received over the year, plus any other payments made that were contingent on a minimum catch.

6. Medical and healthcare payments. If your business employed a physician to conduct yearly physicals or administer flu shots, you might have to send him or her a 1099-MISC. This would include any amount you paid for medications sold to you by the physician. For example, if the physician charged you $20 per flu shot and $200 for labor, you would also include the $20 per flu shot on this amount.

7. Nonemployee compensation. If any independent contractor did work for your business but wasn’t an employee, here is where you report what you paid that person. You aren’t required to send the contractor a 1099 unless you paid $600 or more during the year. As a contractor, or freelancer, it’s in this box that you’ll find the compensation you need to report to the IRS. Generally, these amounts are subject to self-employment tax and income tax. Golden parachute payments, taxable fringe benefits for employees, and referral fees also should be included here.

8. Substitute payments in lieu of dividends or interest. This situation is extremely uncommon and involves loaning out your dividend-paying securities. If you need to use this section, your broker should send you the details.

9. Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale. This is just a checkbox. You aren’t required to report exactly how much you sold to a buyer, just that you made a sale. This box is useful for organizations such as Amway, since it sells items for resale outside of a traditional retail environment.

10. Crop insurance proceeds. If you received payouts from crop insurance, the amount should be input here.

11. and 12. Blank, for government use only.

13. Excess golden parachute payments. A golden parachute payment is one made to an employee (generally an executive) who is leaving a company and is contractually able to receive a large payment upon departure. Excess payments are those amounts above what the individual received on average over the past five years.

14. Gross proceeds paid to an attorney. Here you must input payments over $600 that went to an attorney for legal services.

15a. Section 409A deferrals. Use this box if you contributed to a section 409A retirement plan but weren’t an employee.

15b. Section 409A income. If you contributed to a section 409A plan but it didn’t meet specific guidelines, it can be counted as taxable income, and you must input the amount here.

16. State tax withheld. If any state tax was withheld, it may be listed here.

17. State/Payer’s state number. If state tax was withheld, enter the identification number of the company that withheld the tax here.

18. State income. This is the amount of money reported on the form that is subject to state tax.

When Does Your Business Need a 1099-MISC?

Generally, your business must file a 1099-MISC only if you paid someone $600 or more over the course of the year. If you received more than this amount, expect a 1099-MISC from the payer. A few exceptions include:

  • Royalties. $10 minimum reporting threshold.
  • Fishing boat proceeds. You must report any amount.
  • Consumer goods. If you sold anyone any items for $5,000 or more in a market other than a permanent retail establishment (such as Amway or flea markets), you must report it.
  • Tax withholding. If you’ve withheld taxes for someone because they were subject to backup withholding, you must report it no matter how little you paid them during the year.

Keep in mind that the IRS only requires these forms when companies pay vendors in the course of operating a business. When you pay the neighbor kid for babysitting, you don’t have to worry about reporting those payments.

Taxes Due From Business Income

Regular employees have half of their Social Security and Medicare tax paid for by their employer. When paid by contractors and freelancers (who naturally don’t have tax withheld by an employer), this tax is often called “self-employment tax” and is due in addition to regular income tax. To figure the amount of this tax, self-employed individuals need to file Schedule C (or Schedule C-EZ), which is the form used to tally business profits and expenses.

Transfer the revenue from box 7 of your 1099-MISC onto Schedule C and subtract your business expenses to determine whether you had a profit or a loss for the year. Then, transfer that income amount to Form 1040 (subtract a loss from any other income you report, add a profit). If you had a profit, complete Schedule SE to determine how much self-employment tax you owe and transfer that amount to your 1040 as well.

What’s the Difference Between Schedule C and Schedule C-EZ?

In general, Schedule C-EZ is intended for people who did some work on the side or had a very simple small business. You can’t use  it if any of the following apply:

  • You plan to take the home office deduction
  • You spent more than $5,000 on the business in the past year
  • You employ additional staff
  • You expect a loss for the year (you spent more on the business than you made)

If you’re not sure if you’re eligible for a Schedule C-EZ, don’t risk it. The standard Schedule C won’t take much longer to complete, even if you have small-business expenses to deduct.

What Is Schedule SE?

If you have a profit after you complete either Schedule C or C-EZ, use Schedule SE to determine how much Social Security and Medicare tax you owe. You have to pay Social Security and Medicare tax on the first $106,800 of money that you earn – anything above that is subject to income tax only. If you didn’t make a profit, you don’t have to fill out this form.

In general, you pay 15.3% of your business profits in Social Security and Medicare taxes. Due to it’s complex nature, I highly recommend you use a tax program to fill out this form.

Non-work Income

There are several cases in which you can report your 1099-MISC money directly on your 1040 without having to worry about whether you need to use Schedule C or Schedule C-EZ.

If your income was reported in box 3 of your 1099-MISC, it is generally not considered “earned income” and you do not need to pay self-employment tax on it. However, you do need to pay regular income tax on it. Report income in box 3 of your 1099-MISC plus these other types of income on your 1040:

  • Prizes or Awards. This includes game show or sweepstakes winnings, but not something like an incentive-based contest you won at work.
  • Jury Duty Pay. Jury duty pay is taxable as a write-in adjustment to income on your 1040. Label it “Jury Pay.”
  • Canceled or Forgiven Debts. Your creditor is required to send you a 1099 with the forgiven or cancelled amount. You might receive a 1099-C for this.
  • Barter Income. This counts even if cash didn’t trade hands. If you barter with someone who is a by-the-books type, he or she may send you a 1099-MISC for the value of the services or items they traded with you. Of course, this is your cue to send one for the value of the services or items you traded as well.
  • Hobby Income. This is the little bit of money you might earn from a leisure activity – one you do without intending to make any money. Since you weren’t looking for income, it’s not considered self-employment. Still, you’re required to pay regular income tax on it. If you have expenses from your hobby, you can deduct them up to the amount of money you brought in if you itemize. After three profitable years of making money at a hobby, the IRS will consider it a small business and no longer a hobby.
  • Gambling Winnings. You may not receive a 1099-MISC (you might get a W-2G), but either way, you should include gambling winnings on your 1040. If any income tax was withheld, as sometimes happens with large payouts, you’ll also account for this on your 1040. If you had winnings, you can deduct gambling losses, but only up to the amount you won.

1099-MISC FAQ

You may encounter a confounding situation with one or more 1099-MISC forms you receive. Here are a few of the most common:

1. I received a 1099-MISC for income I wasn’t paid until the following year. What do I do?
If this happens to you, don’t worry. The IRS knows you are not the first person who’s been on the end of some last-minute accounting. As long as you “settle up” next year and accurately report the income on that year’s taxes, you will be fine. Hold onto documentation that supports when you took possession of the money, such as:

  1. Bank account records
  2. Postmarked envelopes
  3. PayPal records
  4. Invoices, paystubs, or other records of payments

2. I got a 1099-MISC for money that was paid to me, but I paid other people with that money. What do I do?
If the payment of that money has anything to do with your business, you can probably deduct it as a business  expense on Schedule C.

For example, if you’re a general contractor in charge of building a home, and you paid money to subcontractors such as plumbers, electricians, or drywallers, you can claim the sum of what you paid as a business expense against the income you received on your 1099-MISC. Other examples of business expenses include postage, office supplies or equipment, communication, and travel expenses.

3. The only income I earned all year was reported to me on a 1099-MISC. How much do I owe in taxes?
If you didn’t pay estimated taxes and had no taxes withheld by an employer, you may owe a lot. You’ll owe 15.3% of your profit in Social Security and Medicare taxes right off the bat. Additionally, you’ll have to pay regular income tax, the amount of which will depend on your total income after taking deductions and credits. Plus, you might be penalized for not paying estimated taxes throughout the year (if your tax liability is more than $1,000). But fortunately, filing your taxes is quite simple.

Start by filling out a Schedule C or Schedule C-EZ – this is where you report 1099-MISC income and deduct related expenses. Then, fill out Schedule SE to determine your Social Security and Medicare tax liability. (Half of this amount is deductible when you determine how much regular income tax you owe.)

Last, report your profit from Schedule C (or C-EZ) on your 1040 to figure what you owe in regular income tax. If you know that you’ll only have 1099-MISC income this year, it’s best to pay estimated taxes during the year to avoid an underpayment penalty.

Final Word

“Miscellaneous” is like a double-edged sword when it comes to a 1099 form. It’s an easy way to cover tax issues that don’t fall into conventional categories, but it can create confusion as well. If this is your first year owning a business and dealing with 1099s, it’s worth hiring a tax consultant to make sure you take advantage of all deductions available to you and you schedule the correct amount of estimated taxes for the following year.

Have you had any issues reporting income from a 1099-MISC?

Kira Botkin
Kira is a longtime blogger and serial entrepreneur who enjoys gardening, garage sales, and finding stray animals. She lives in Columbus, Ohio, where football is a distinct season, and by day runs a research study for people with multiple sclerosis. She hopes that the MoneyCrashers team can help you achieve your goals and live a great life.

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  • spencer yao

    I PERFORMED PRIVATE DUTY (HOME HEALTH CARE) AND I GOT 1099 MISC FORM FROM THE PAYER. THIS IS THE ONLY JOB I HAD FOR THE ENTIRE YEAR 2010. PLEASE I NEED TO HOW AND WHERE TO PAY SOCIAL SECURITY TAX AND FEDERAL TAX SINCE THESE TAXES WERE NOT WITHHELD ON THE 1099 MISC FORM.

  • Kira Botkin

    You’ll need to complete your tax return to figure out how much you will need to pay in social security tax and federal tax. If you didn’t make over $58,000 or so, I would use the free version of TurboTax or H&R Block to file your taxes. You are technically self-employed so be prepared to owe a lot in taxes! The program will tell you how much you will owe. Once you know how much to pay, you can either pay it through the tax program or go to www.irs.gov/e-pay to pay.

  • setfree2

    I was responcible for 9 guys getting paid and the money wos sent to me as the sub contractor.
    The 1099 misc I got from the main company reflects the total amont of earnings.
    I sent in 1099 misc for each person with a cover sheet 1096 in Feb. Do I send a copy of the 1099 I got from the company and also a new copy of 1099 misc for each earner. When I filled out my taxes I did not see a way to get ride of the $2300 dollars I paid the others I used taxAct. Thanks

  • Kira Botkin

    You should send in the 1099-MISC for each of the people you paid to the federal government, but it sounds like you have done that properly. However, when you file your own taxes, you’ll need to file a schedule C in order to avoid paying taxes on that money. You’ll list the $2300 you received as income, and then under expenses you list the total amount that you paid out to the other guys as “contract labor”. You’ll have to pay self-employment taxes on any amount you didn’t pay out, but that’s better than paying taxes on the whole $2300!

  • Andrea

    Hi I only recieved a 1099-MISC for 2010, should I have to pay in over almost 2,000 $ to federal? Does that seem right?

  • Kira Botkin

    Hi Andrea, I can’t say if that’s accurate without knowing how much money was reported on your 1099-MISC or your overall situation, but since there are no taxes at all withheld from this money, you frequently owing a lot more taxes on money that comes in this way than from a regular job. You will owe Social Security and Medicare tax (which will be included in your federal taxes owed) as well as ordinary federal, state, and local income tax on all your 1099-MISC income. When I get freelance income I assume I will be paying between 30% and 50% of it as taxes. It can be pretty steep!

  • Becstra

    If I sent an invoice for $1,714 in work done on 12/25/2010, received $214 of that invoice on 12/30/2010, but did not receive the remaining $1,500 of the invoice until 1/7/2011 by check (though the check was dated 12/28/2010), should it be included on the 1099-Misc? It seems to me that if they still had that money in 2010, and I obviously did not have that money in 2010, then it should not be claimed on 2010 taxes. This is my first experience with a 1099-Misc, and though I’m fine with including it in my taxes, I am having a difficult time accepting the $4,874 total they mailed that included the $1,500 I did not have until 2011. Any help is truly appreciated. If you can provide sources where I can verify your findings, not opinions, that would be preferred.

  • Kira Botkin

    They may have elected to pay you in this way to provide some benefit for their own tax situation. Is there some reason that the money was split up, if it was all on one invoice? That looks fishy. At any rate, this is an accounting issue more than a tax issue – I’m assuming you do not have some kind of funky fiscal year set up and are using cash accounting – so if you didn’t receive it until 2011, it’s counted in YOUR books as 2011 profit.

    You can ask them to issue you a corrected 1099 but that’s unlikely to happen. What you can do is file on paper and include a note attached with a copy of the check’s deposit slip to show you didn’t receive it until 1/7/11. For one thing, the IRS is unlikely to even notice for quite some time. Next year you will have to attach another note again to show why you’ve got more than your 1099 shows.

    Sorry but unless you are actually an IRS agent everything is an opinion when it comes to taxes. Some accountants were chatting about this issue here: http://community.intuit.com/posts/1099-shows-income-earned-not-received

    Didn’t see anything from the IRS specifically on 1099′s but it stipulates for W-2s that employees pay taxes on the money in the year in which they had use of the money. http://www.irs.gov/instructions/iw2w3/ch01.html

  • not given

    Obviously they wanted to claim the $1500 as an expense for 2010 but didn’t have the money in the bank to cover the check. They probably wrote the check on 12/28 and then waited to mail it until they could cover it. Do you still have the envelope it came in? Check the postmark. I don’t think they can legally claim the expense unless it was postmarked before midnight New Year’s Eve, if you want to make an issue of it.

    You’re gonna have to pay taxes on it eventually, which year is better for you?
    As long as all your schedule c gross receipts from contract labor is more than the total of all 1099s, I don’t think it matters if you wait to claim the income for 2011. I’m assuming you had other clients that didn’t pay enough to need to send the 1099. If this is the only income you have from contract labor, that may be a different story.

    Surely you wouldn’t need a note to explain why your income is higher than your combined 1099s Lots of customers may be paying less than $600 and have no need to send the form. The IRS has no way of knowing that. I know back when we were in business we might have $45k+ paid to us in total for the year from all customers and only get one or two 1099s for a few hundred dollars from businesses that were required to send the form. It’s not like we had to add the 1099 total to what was already on the books, since it was already on the books.

  • Kira Botkin

    Yes, it does seem likely that they purposefully sent out the bulk of the money late, but the issue is that she stated this was her first experience with 1099s and thus probably doesn’t have any others. If you’re reporting a LOWER income than what is on the 1099s, the IRS will have an issue with that. I also have reported self-employment income that far exceeds my 1099s, but they’re always happy to have you pay more.!

  • Ralph

    I have the same situation. My pay checks were delayed by three weeks, so the the staffing company got the overall payment direct deposit from the client on 12/31 but I did not get my paper check until first week of Jan. 11. So, we are talking about $6000 I would like to claim in 2011- what do I need to do? Thanks.

  • Kira Botkin

    Claim it on 2011′s taxes. If the $6000 you received on January 11th is all that’s on your 1099, just put it aside and file it on your taxes next spring. It’ll probably take that long for the IRS to notice it’s missing anyhow! Just make sure you have some kind of record of when you received the money.

  • Ralph

    No, the total for the 2010 1099-MISC is much higher than the $6000. The $6000 was earned from Nov 29-Dec 10th. There is a three week delay in getting the money, as mentioned before. The staffing company, I assume wrote the check, from what I read above, on Dec 31st for their own tax purposes. I did not get the paper check unitl the Jan 5th, to be more exact. I had some windfall in 2010 and trying to move this $6000 to next year to save on the 33% tax rate, as I will make less this year. Please advise. Thx

  • Kira Botkin

    Just report the amount that you received December 31st or before. It is OK if they don’t match up as long as they do in the long run. Since you will be reporting the rest next year, just keep good records and don’t forget to report it on next year’s taxes and you should be fine. Your bank’s records showing when you deposited the check are a good resource.

  • Steve

    I received 3 1099′s from 2 different business areas totaling less than $20,000 and that was my entire income for the year. I have no business license. What’s the best form or way to do my taxes?

  • Kira Botkin

    You don’t need a business license to be considered a business under American tax law. If by “business area” you mean different lines of business, you will need to file 2 Schedule C or Schedule C-EZ forms, one for each line of business. You will use those forms to determine the profit from each line of business (your income minus your business expenses, if you have any) and then add that profit to your 1040 on line 12.

  • Cindy

    Hi! I am helping my best friends plan their wedding, and to procure services and goods needed. I am not a wedding planner, and I am making absolutely no profit from them! Ie. I have estimated the cost for their alcohol expenses for the reception… they write me a check for the alcohol, I cash it, then turn around and purchase their goods for them. Any additional money from the estimate who be returned to them…. or, found a personal chef that will work for a flat rate, if we provide all of the money for the food cost. I estimated what that would be, my best friend gave me a check, cashed it, and will use that money to buy all of the food for the event, and to pay the chef. Any money left over, will be given directly back to them…

    Didn’t even consider that I may be liable for taxes, as it would appear that I could be making a profit. They are in no way paying me for helping, nor would I accept it if they offered…

    Is there anyway to show that I am not keeping any of the money for profit? Or, am I actually going to end up having to pay and loose money on taxes!?!

    Thank you, Cindy.

  • Kira Botkin

    Well the first question I would ask is, are your friends planning on issuing you a 1099, or otherwise reporting this money to the government as income? Otherwise there’s no reason that you have to put this money on your tax return at all.

  • Cindy

    Oh god no! I am providing them with exact receipts for every dollar they give to me. I was under t’d assumption that IT would be reported to The government regardless, due to the amounts of the checks. Received one today for 10k for the accommodations reservations…

  • Kira

    I’m just not clear where the assumption comes from that any of this would be reported to the IRS. The IRS only knows about the income that is reported to it. It doesn’t keep track of what’s in people’s bank accounts, and the IRS does not care how your friends choose to spend their money.

    If you’re extremely worried about this, I suppose you could file a schedule C with next year’s taxes, but this is not a business transaction and I don’t think you need to. You might want to have them make out the checks directly to the vendors, if you’re this concerned. The only possible issue would be if your friends are in a serious audit that involves their bank records being pulled and then they might owe gift tax. But you don’t owe taxes when people gift you money.

  • Cindy

    Whew! Thank you! I feel so much better! I started to GET concerned when they were requesting my ssn numberdue to The large dollars amount of the check. The lady at the bank said it was mandatory to report it to The Irs for tax purposes. I had stated that IT wasn’t a payroll check, and she basically just told me, that IT would be reported anyway? I obviously know very little about this stuff. Thank you so much! You have been so helpful!
    Cindy

  • Kira

    Your bank teller is incorrect – that’s not a tax regulation, that’s to track money laundering. Any deposits of $10k of over are tracked by the federal government. As long as you don’t subsequently smuggle heroin into the country you have nothing to be concerned about.

  • Mbob

    I receive a 1099 misc issued to my social security number. Can I request federal withholding be taken? I don’t like having to pay in.

    • Kira Botkin

      You would have to arrange that directly with the company that’s issuing you the 1099 – but generally, no. Part of the reason many companies issue 1099 forms instead of adding people as regular employees is because it’s a heck of a lot less paperwork for them. I’m not clear what you mean by “paying in”, as one way or another you will have to pay taxes on this money. But if you are concerned about coming up with a lot of money on tax day, you can send in money for your tax payments throughout the year so that you don’t have a big bill at the end, and in fact the IRS requires you to do so if you receive quite a lot of money by 1099.

      • Sophiab27

        Hi Kira,

        I will file taxes for the first time this year, I work in a food concession, I got paid cash and my boss is issuing me a 1099. I made 11k dollars last year and I am planning on claiming dependents. The thing is a worked for this company in Indiana for 5 months, but I live in CA and do not know how to proceed with this.

        Thanks you, Sophia

  • Arambrose

    We have a small corporate event planning business. In the course of doing business we will at times hire vendors to perform functions at corporate events we were hired to plan and execute. Vendors such as caterers, lighting contractors, linen suppliers etc. They will charge us a fee for their service and it can run up into the thousands of dollars. Do we need to submit to them 1099′s and if so which box do we enter the amount of money paid to them??

    • Kira Botkin

      Yes, you should issue them a 1099 if you gave them more than $400. You might want to ask all vendors you work with to fill out a W-9 when you start working with them so you have all their info ready for filling out the 1099 at the end of the year.

  • Doug

    Are 1099 misc forms to be used for payments to vendors that aren’t incorporated that perform a service or provide merchandise. Also, should a 1099 misc. be sent to a S corp.

  • Doug

    Are 1099 misc forms to be used for payments to vendors that aren’t incorporated that perform a service or provide merchandise. Also, should a 1099 misc. be sent to a S corp.

    • Kira Botkin

      If you simply purchased items from them, and these items had sales tax properly accounted for and all that, you do not need to send them a 1099. If they performed services and you paid them more than $400, you should send them a 1099. It doesn’t matter what their incorporation status is.

  • Doug

    Are 1099 misc forms to be used for payments to vendors that aren’t incorporated that perform a service or provide merchandise. Also, should a 1099 misc. be sent to a S corp.

  • Sandy

    When providing a 1099misc. Form to an independent contractor that worked for us but also had payments for child support taken out of his check for services rendered to us, do we report his gross total for services or do we first subtract payments made to Family Support Registry?

    • Kira Botkin

      Well, I’d probably check with an accountant, but since child support is not tax deductible, I’d give him a 1099-MISC for the whole amount including all the child support paid.

  • Anonymous

    if you cant report contract labor on a 1099-MISC to a corporation, how do you file or what do you file the monies/wages on?

    • Kira Botkin

      If a corporation provided you with labor, you can send them a 1099-MISC. You should have them fill out a W-9 so that they will select what kind of corporation they are.

  • Anonymous

    if you cant report contract labor on a 1099-MISC to a corporation, how do you file or what do you file the monies/wages on?

  • Barvilla730

    I already e-filed my taxes but today I received a 1099- MISC in the mail. What should I do? Will the IRS simply deduct the taxes I owe from my federal return?

  • Georgehorvath49

    I only made 2200.00 last year on small painting jobs how should I file

    • Kira Botkin

      Unless you are going to receive a 1099-MISC form for any of those painting jobs, or you are expecting to be eligible for some refundable tax credits, you probably don’t need to file at all.

  • Trock61

    I am a sole proprietor and have been for the past 12 years. My arrangement with my client is they pay me an hourly rate and cover my expenses. I initially pay for airfare, hotel etc and then they reimburse me.

    This year the client added my reimbursed expenses to my 1099. Now I have $33,000 worth of expenses which I must itemize on my taxes?

    • Kira Botkin

      You need to contact them and ask them to issue a 1099-MISC that only shows the amount you were paid for your labor. Reimbursement should not show up on your 1099-MISC. If they refuse to do that, then you need to fill out a schedule C and deduct all those expenses back off – it will equal out, but they shouldn’t have done that in the first place.

  • Meoww_63

    I received a settlement from the company I work for, included was a w2 and 1099-misc. on the 1099-misc it doesn’t show any fed or state taxes taken but on the check it clearly shows they were. Can I put these amounts in even though it doesn’t show on my 1099?

    • Kira Botkin

      Are the W-2 and the 1099-MISC reporting the same money? I’m wondering if the W-2 is for your regular wages and the 1099-MISC is just for the settlement.

  • Nora_Simpson

    Hello,
    My 1099-Misc has an amount listed which is 3 times the amount I was paid. The business owner says this amount reflects the total amount I generated. Is it legal for him to place this amount instead of the amount I was actually paid? Is it fair or legal that I pay tax on the full amount of money I generated when I only received 40%? Thanks in advance for you expert knowledge.

    • Kira Botkin

      I have no idea what your boss means when he says the amount you “generated”, since employees usually generate a lot more in revenue than they get paid – that’s how the business stays afloat! It doesn’t matter how the business owner determined what you would get paid, he cannot put more on your 1099 than you were actually paid. That is called fraud. I would ask for a corrected 1099 that shows only the amount of money that they actually paid you during 2011, and if they won’t give it to you, I would call the IRS tip line at 1-800-829-0433.

  • Nora_simpson70

    ps… The agreement was verbal and the I would be paid 40% of production.

  • Zhago100

    Hello, my 1099-misc shows on box 7 that i made 12000 workin as a contractor, i have one dependant and im single i also got a w-2 will i get a tax return or will i have to pay the irs? This is my first time doing my taxes.

    • Kira Botkin

      It’s impossible to say because there are so many factors that are different for every person’s situation outside of how much money is involved. If this is your first time doing taxes, I’d probably recommend you have an accountant or H&R Block do them.

  • Tobeyjking

    Hello I received a misc 1099 form for which I made 6000 and the rest of the boxes are empty, I also should be receiving a W-2 form from a other job, will I have to owe a lot?

    • Kira Botkin

      You will at minimum owe 15.4% of the $6,000 in self-employment taxes, and depending on how much you made at your other job and other factors, you may have to pay up to half of it in taxes.

  • Baltimore18

    Thank you for your informative article. I am hoping you can shed light on my problem.

    Back in college I worked for a vacuum cleaner salesman doing door to door, it only lasted a month because he made me uncomfortable and the whole business felt very shady, I quit about a month and a half in and he refused to pay me (about $700). I reported it to the BBB and told the police but really didn’t know what to do and a lawyer would have cost more than what I had made.
    That was in 2006.

    Fast forward to February 2012 and I got a 1099 in the mail for 2011, with $707.03 in box 7 “nonemployee compensation.” My problem is, I didn’t work in NY all last year and they never sent the check – what do I do now? I don’t want to pay taxes on money I didn’t ever get but ideally I would love to take the opportunity to force them to pay me the wages I earned.

    Any advice?

    • Kira Botkin

      I don’t think you have much chance of forcing him to pay up, but he’s knowingly submitting fraudulent documents to the IRS. That is tax fraud – I’d call the IRS tip line, which is 1-800-829-0433.

  • Anonymous

    Hello,
    I have a disabled adult son who i care for in my own home and I receive funds from the state to care for him instead of putting him in a group home or state school. I received a 1099 misc with this income in box 7 from the provider who pays me after submitting my days worked to the state. Of this money I paid my son $5000 to assist me periodically during 2011 to assist me with taking him to do recreational things during the day and on some weekends while I work a full time job. How ever I did not provide him with a W2 or 1099. How should I claim this on my Schedule C? Is it to late for me to issue him a 1099 misc box 7 income?
    This is the first year I have done this.

    Thank-you in advance for your assistance.

    • Kira Botkin

      Yes, you should issue the son who helped you a 1099 for the $5,000 you paid him. You have two days to issue him a 1099-MISC – February 15th is the deadline. He will need to file that as income on his taxes. If he has already filed, he will need to file an amended return.

  • Csuebe

    I have a 1099-misc. made 2037.75. Do I take state and federal taxes out and what %? Also do I take out Medicare and SSN?

    • Kira Botkin

      How much in state and federal taxes you take out depends on what state you’re in, and how much other income you have. You do need to pay Medicare and Social Security taxes, also known as the self-employment tax, which is 15.4%. I’d recommend you use a tax program if you’ve never gotten a 1099 before.

  • guest

    Hello, I have a question I just received at 1099 MISC form for $2500 in box #7. How much taxes would I have to pay for this amount? if my total income from all other W2 job forms adds up to about $13,000 and I’m single. ?

  • guest

    $280 about in federal tax has been taken out for the w2 and no state tax was deducted. However social security and medicare were.

  • Pauline Lewicki

    I received a 1099 Misc form which includes in box 7 approximately a golden handshake payment I received for retiring early combined with a small amount I earned earned as a consultant from my former employer subsequent to my retirement. How do I report all of this on the Schedule C form?

    • Kira Botkin

      You should fill out a schedule C as a consultant – “consulting” would be your line of business, or whatever specific field you were in, and report the income from the 1099. You can deduct any expenses you had from the consulting period, if you had any.

  • confused

    I received a 1099 misc for an item i sold to a business. I couldnt pay for it, so i sold it and i used the money to pay for the bill used to purchase it. The amount is reported as non-employee compensation. This was a one time sale, im not self employed or a constractor, services were not rendered but a item was sold. Should i have received a 1099 misc and reported as compensation? If so, how do i report it, I already filed my return?

    • Kira Botkin

      No, they did it wrong. They absolutely should not use box 7 for an item that they bought from you. That is NOT compensation. You should contact them and ask them why they did that.

      Also, when did you receive it? You should have received the 1099 by February 15th.

      I would find as much documentation as possible for this series of events and keep it with your taxes, and do not file with this 1099 as it’s written. Depending on your state, they may need to produce a different kind of documentation, but this is definitely not correct.

  • Dave Fender

    I’m a consultant operating as a sole proprieter on a cash basis. My client has sent me a 1099-MSC which includes a sizable sum mailed to me on 12/31/11. Naturally, I received it in January, 2012. I would normally record this as 2012 cash revenue, but IRS may see this as 2011 income. What should I do here?

    • Kira Botkin

      You record the money as received when you receive it. It’ll come out in the wash – just make sure to document it. A lot of companies do this and it’s not very nice, but what can you do?

  • Accountant

    My company forgot to send a 1099-Misc to a vendor. What forms are required if we correct this after the date to send to the vendor?

    • Kira Botkin

      The regular forms, plus the form you’ll have to fill out when the IRS fines you (which might take two or three years for them to get around to doing.)

  • Cindy

    I have a question. I have been doing my own taxes for years. The only thing that confuses me is on the 1099 box 7 doesn’t include my personal earnings. My personal earnings are almost
    $12,000 additional. Where do I claim that income?

    • Kira Botkin

      I have no idea what you mean by personal earnings.

  • Pvero

    My husband does one article a year for a company, His payment is $1500.00. He has a regular full time job. When I enter into Turbo Tax it ups what we owe by $800.00, Are there any tax breaks we can get on this?

  • Pvero

    My husband does one article a year for a company, His payment is $1500.00. He has a regular full time job. When I enter into Turbo Tax it ups what we owe by $800.00, Are there any tax breaks we can get on this?

    • Kira Botkin

      Unfortunately, that’s probably correct! Between state and federal taxes, that looks about right for someone who’s also got a full time job. I’m guessing it’s reported in box 7, so it’s self-employment income. Did Turbotax set up a schedule C for him? Self-employment income is subject to regular income tax plus an additional 15.4% for Medicare, etc, so if he also has a regular job that’s going to put him at a higher tax bracket. The only tax break automatically associated with this is that you get to deduct half of the 15.4%. But, if he has any expenses associated with writing the article, he could deduct those on his schedule C, and if he uses an office to write the article for a portion of the year, he could take a little bit off with a home office deduction for that month he was writing the article. To avoid the sticker shock in the future, you might have him change his W4 at his regular job so that more taxes will be withheld from his paycheck and you won’t have to pay such a large lump sum at the end.

  • Bookman

    I have a question about how to treat royalty advances that are used to pay expenses. I am an author, and I received a 1099-MISC from my publisher for a payment made on my behalf to a vendor who did some of the graphics work for my book (about $1800). This payment was made from an advance on my royalties. So, it is showing up in Box 2 as a royalty to me. Do I need to state this as income? Is there a way I can deduct some or all of it as a business expense?

    • Kira Botkin

      Yes, it is income, although it really shouldn’t be a royalty. I would file a schedule C, add in the money as income, and then deduct the payment to the vendor. Then you’ll end up at zero.

  • Daniel

    I received a 1099-misc that has $2,000 in other income listed. It was from a jackpot that I hit in a casino poker room. I made no income for the year other than that. Do I need to file for this?

    • Kira Botkin

      If you really have no other income, then no you do not need to file. For future reference, we have another article that has the specific income limits: http://www.moneycrashers.com/do-i-have-to-file-taxes-make-how-much/

  • Tlphillips2u

    Hi Kira. Thank you so much for this article. it helped me a great deal for this tax season.I wish I’d found your blog sooner though lol!

    I have two questions:

    First, I am a self-employed performer. I did not know until I was filing my taxes a couple of days ago that I was required to issue a musician I worked with a 1099MISC form because I paid him more than $600 over the course of the year. I obtained his socail, e-filed it with my taxes and added it as contract labor deduction. Do I now print and mail to the 1099 to the payee and the IRS? Do I have to submit a 1096?

    My second question is this year I am doing a one-time performance for a company for $200. They have asked me for my social. Am I required to give them my social?

    Thank you in advance for your help!

    • Kira Botkin

      Yes, you should send the 1099 as soon as you possibly can, and you will need to send in a 1096 to the IRS as well.

      If you don’t fill out a W-9, which is really what they should be having you fill out, they can do backup withholding, which involves sending 28% to the IRS on your behalf. So no, not required, but recommended.

      And yes, you will definitely be fined, but it could take a couple years to get the fine letter, and it will probably not raise your audit risk. There is nothing you can do about it now unless you have documentation showing that you didn’t know the total for the musician would be over $600.

  • Tlphillips2u

    I forgot to ask will I be fined for filing this late; if so how much would they probably fine me? Will this make me an audit risk? What should I be doing regarding this issue?

  • Joy

    Hi! I rent stations in my tattoo business, but I don’t know if I should be filing 1099-MISC or if I should have the renters file. I’ve been scouring the internet for answers, can ‘t seem to find anything on this. Help!

    • Kira Botkin

      You give somebody a 1099 when you paid them. I’m assuming that the renters paid you. Therefore, you don’t need to give them anything. They, however, should probably give YOU a 1099, if they’re filing everything by the book.

  • Karenpena

    I run a small antique business. we often go to garage sales and estate sales. do we need to issue 1099 forms when purchase more than 600 from any one individual? thanks for your help

    • Kira Botkin

      No, you get an exception for garage sale type environments unless you make a purchase over $5,000.

  • trishteach

    I agreed to settle a loan that I owed on for about $2,000.00 less than the original amount. I just got a letter from the IRS saying that the loan company sent me a 1099 & I didn’t put that on my income tax form. They are charing me tax on the amount and have reduced my education and child credits – I did my taxes through turbo tax lat year and they had approved the income credits. Do you think they took my credits away because I didn’t know to file the $2,000 as income?

  • trishteach

    I agreed to settle a loan that I owed on for about $2,000.00 less than the original amount. I just got a letter from the IRS saying that the loan company sent me a 1099 & I didn’t put that on my income tax form. They are charing me tax on the amount and have reduced my education and child credits – I did my taxes through turbo tax lat year and they had approved the income credits. Do you think they took my credits away because I didn’t know to file the $2,000 as income?

    • Kira Botkin

      No, it sounds like they took some of your refund because you owe extra tax on the $2,000, or that having the extra $2,000 in income reduces your eligibility for those credits. Turbotax can only tell you if you qualify for a certain credit amount based on the information you give it, which didn’t include that $2,000 of income.

  • Jessicaannsaucedo

    Hello,
    I am working on the 1st year taxes for my deceased mothers Trust. Last was a 403B account cashed in by the former POA prior to my mom’s death, (while she was in a coma), and then deposited into the trust’s checking account (aprrox.33K). In the same tax year (2011), after my mom’s death, the trust received a payment from a Right of Way from a utility company (approx 42K). However the check was never cashed in 2011. The idea being that having this much untaxed income deposited into a trust account will generate a giant tax liability, better to receive the funds in 2012 when there is much less income. Do I need to ask the utility company to move the 1099 income statement to 2012 or does that even matter if we just report our income in 2012? My tax accountant has said to have the utility company change it, they don’t want to….My account seems sure they should. PS I still have the original check.

    • Kira Botkin

      You report the income as received when you get the money, which in most cases is when you receive and deposit the check. I’m curious though as to WHEN the trust received the check from the utility company. If it was received in December 2011 and cashed in January 2012, then you’d be fine just making a note to file as to when you received it. But if it was received earlier in the year and you just sat on it (I’m unsure what you mean by that you still have the original check), you don’t really have a leg to stand on there. And as long as the date on the postmark is December 31st, 2011 or before, the utility company does not have any reason to change it to 2012 – especially since that would require THEM to refile their taxes.

  • happilymixedup.com

    Hello Kira
    I have an internet networking community. We offer our premium members profit sharing through new member referrals. They get $5.00 for each new premium member that signs from an existing members invite.
    My question is, members to this online community are all over the country & I do not think I’ll be able to get SSN’s from any of them – I don’t think that they would want to give their SSN’s. Can I still send them 1099′s without the SSN’s #?

    • Kira Botkin

      The short answer: No.

      The long answer: Here’s what you are going to have to do. Keep track of how much each member has earned (I am hoping here that you have good accounting methods in place) and when they are about to get a payment that would push them over $600, send them a request to fill out a W-9 through your site. If they don’t want to fill it out, they don’t get any more payments. No one WANTS to give out their SSN (and if they complain, tell them they can register for an EIN) but it’s required. You cannot just send a 1099 with someone’s address and no SSN unless they are absolutely refusing to give it to you and you have already paid them over $600. But realistically the IRS is going to want to know why you didn’t get the info before you gave them the money.

      Keep in mind that the IRS will accept it if you create a W-9 form on your site – as long as it has all of the same blanks and text, and someplace to type a “signature”, it’s legal in their eyes. That will help eliminate the step of having to get them to sign it and mail or scan it.

  • william castle

    HI Kira, I’ve been contacted by the IRS about not filing for 2009/2010 .. I told them it may take some time to get 1099′s that I never received at the time.. the IRS agent told me they would send me what they had for reported income for those years and when they sent them to me they had less than half of what I believe was received.. my question is do I legally have to pay taxes on money that was NOT reported to the IRS? I assume the only way I might have an issue is if one of my accounts was audited..

    • Kira Botkin

      Legally, you’re required to pay taxes on all income that you receive whether the IRS knows about it or not. If you have something significant in your records that show you are missing large chunks of money, I wouldn’t assume that that 1099 never got filed and will never show back up.

      But in the real world, one does not look a gift horse in the mouth.

  • Resptrans

    As a business owner I am always confused about LLCs. Do I have to send them a 1099 or are they considered a corporation

    • Kira Botkin

      If it’s a person who’s operating a one-person LLC, I’d send them a 1099. If it’s a large business that just happens to still be an LLC (especially if you get receipts from them) you can probably skip it.

  • Edna Dungee-Baytops

    I receive monthly payments of $75.00 from a Baptist Church for during church bulletins as well as typing letters, and some other persons as well receive monthly payments. Is this church exempt from sending out 1099 Misc Forms, or should they be required to send out the 1099 Mic Form? I report this income on Self Employment Tax Irs Form. Thanks

    EDB

    • Kira Botkin

      Yes, a church is an employer like any other, so they should send out 1099-MISC forms.

  • Larry Both

    I purchased the 1099 Misc forms from Office Depot to send in for one subcontractor so I’m ready to fill them out. The question is can I scan them and fill them out or do I have to do it manually (write it in with a pen)?

    • Kira Botkin

      You should fill them out manually with a pen – there are computer-fillable forms available, however. You can also have a 1099-MISC created for you online and filed electronically.

  • Sdwsmcdonald

    I received a 1099-misc from my customer that listed the amount they paid which included sales tax. Can I deduct the sales tax from this amount since it is not my income?

    • Kira Botkin

      You should be deducting all the sales tax you pay elsewhere on your Schedule C.

  • Jolin

    I am a sole proprietor providing merchandise to out of my state customer. They are corporation manufacturer. Since they are out of my state and not end user, so no resale number has been requested by me. Now they want me to fill out W-9 for their record. If they want to give me a 1099-MISC, which box they should fill-in for their payment to me? This is goods only, no service involved. Can I refuse to fill out the W-9?

    • Kira Botkin

      If they’re buying goods from your company, regardless of how many people work at it, they shouldn’t issue you a 1099. The invoices you sent them (you sent them invoices, right?) are the correct documentation that will allow them to deduct those expenses on their taxes. You could send THEM a 1099 with box 9 checked, if you like, but it really doesn’t make sense for them to send you one.

  • dazed&confused in NYC

    I have a 1099-misc for 2012 with $11k in the Box 1 rents section. – i have an apartment (i’m a renter not an owner) that I rented out via airbnb in 2012, so the 11k amount is the aggregate of all the folks who rented my apartment during 2012 via them. I know I have to report this, and I think it’s schedule c and not line 21 of the 1040 – but I’m totally confused – i don’t own a business or have a business name or business EIN or activity code, but the schedule c asks for all of this. All I wish to do is report this amount and pay whatever tax is due on it, but I don’t have the slightest idea which line number on schedule c the 11k is supposed to go on. this is beyond frustrating! what am i doing wrong?

    • Kira Botkin

      What you’re actually looking for is Schedule E, not Schedule C – you’ll only need to fill out a few lines on that.

  • mjrb

    hello my wife and i are doing our taxes and once i put in a 1099 for $2500 that i received for services our return goes down $900. does this sound right? doing taxes in maryland

    • Kira Botkin

      I have absolutely no idea whether the exact amount is right without seeing your entire tax return, but when you are paid money on a 1099-MISC, you must pay regular income tax plus an additional 15.3% for Social Security and Medicare taxes. $900 is 36% of $2500, so that sounds about right – the 15.3% plus 20% for your regular income tax. Small business taxes take quite a bite.

  • shana

    have a ranch which I use a schedule F for, I have a truck that has a detatchable slip tank so part of the time I use it to haul hay and the other I use to water down roads on my ranch and for other people which I get a 1099-misc. Can I use just one schedule F for this

    • Kira Botkin

      It sounds like you are probably going to need to file a Schedule C for the 1099-MISC since you are not earning that money by doing farming work on your own farm. Using the equipment from your farm does not necessarily mean it is farming work.

  • EMEE

    WITH THE 1099-MISC BOX 6, CAN YOU OFFSET INCOME WITH EXPENSES?

    • Kira Botkin

      The 1099-MISC is exclusively for reporting payments that were made to someone. Box 6 is for reporting payments you made to medical providers, not for your own medical expenses. You must use Schedule C to deduct appropriate business expenses.

  • Drea

    I have started a business, its a on site repair company. My husband does the physical work. We were hoping not to have to ” put him on payroll” as we are in the middle of a custody and child support battle. So our original intentions were to 1099 him. I am beginning to become concerned with this not being accurate

    • Kira Botkin

      Well, what you’re going to run into is whether he actually meets the definition of an independent contractor who can be given a 1099. If you tell him where and when to work, and he works set hours on a schedule you give him, he’s probably an employee and needs to be on payroll. If it’s more like you give him leads and he calls the homeowners and sets up his own time to show up, then he could plausibly be an independent contractor.

  • Marcus

    Hello drea, can I obtain the form free or do I have to pay for it?

  • RIRedRobin

    Husband and wife will be filing as Qualified Joint Venture for first time, understand the need to file 2 schedule Cs, and SE splitting Income and Expenses. Income is reported on a 1099 Misc under Husband’s SSN, Can the amount just be split between the two, or does a 1099 Misc need to be submitted from husband to wife to allocate the income?

  • Jordan

    I am an Esthetician and rent a studio. I pay the landlord a weekly rent and pay him $13,000/year. I was told by my accountant that I needed to send him a 1099 MISC. He is telling me he won’t give me the federal ID number that I need and is telling me my accountant doesn’t know what she is talking about. From the research that I’ve done, it sounds to me like my accountant is correct. Just needing a little info and guidance before responding to my jerk of a landlord.

  • Samuel

    If the payer issues a 1099 misc to an out of state vendor does he put the payer state in box 17 or the recipient state..does box 17 have to do with the state the work was actually done it

  • Brian

    Hi, I have two questions:
    I’m a freelance artist, and many of my clients are not savy business people, and do not understand that they need to send me a 1099, even though they’ve paid me more than $600 in the tax year. How long do I have to wait for a 1099 that most likely won’t be coming?
    And do I have to enter in each 1099 – or can I just add them all together and put it in the total income box? So I would still be claiming the same amount of total income, I would just not be taking the time to enter each 1099 (potentially, there would be dozens).
    Thank you!

  • paula

    Hi, my husband sold a commercial truck and trailer of ours to another company for a total of $12,000.00 last year. The company sent him a 1099-misc in block 7 for this purchase. Is this correct? Do we need to report this sale on our taxes, we are LLC by the way.

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