When it comes to accounting, there is never a shortage when it comes to forms.
Understanding the basics of accounting is knowledge just about every person wishes they had. This article will help you understand one of the most common forms: Form 1099-Misc.
What is a Form 1099-MISC?
In the United States, Form 1099-MISC is a tax form that reports miscellaneous income. The Internal Revenue Service (IRS) requires organizations to report all business transactions involving rents, services rendered, prizes and awards if they are valued at $600 or more in a calendar year.
This means the organization that paid you must file this document with the IRS by January 31st of each year even if they paid you a total of less than $600.
If the organization is filing more than 250 returns for U.S taxpayers, they are required to file electronically regardless of how much money they have paid their contractors.
In the United States, Form 1099-MISC is a tax form that reports miscellaneous income.
Who Needs Form 1099-Misc?
People such as independent contractors or freelancers are the individuals that will receive Form 1099.
According to the IRS, anyone who meets the following requirements is required to complete Form 1099-MISC:
Anyone who receives $10 or more in royalties or broker payments.
$600 or more in:
- Rent or rents
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Generally, the cash is paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney
- Any fishing boat proceeds
How to fill out a Form 1099-MISC?
Typically, the person responsible for paying you will complete Form 1099.
That form will include things like your name, address, and phone number along with the amount of payments you received and the services (or goods) you provided to receive them.
What is the difference between 1099-MISC and 1099-NEC?
Even though these two forms might seem similar, there is one main difference.
Form MISC reports miscellaneous income and the contract was $600 or greater while form NEC reports non-employee compensation which means it could be a payment made to an independent contractor for services rendered but less than $600.