What Do I Do With This 1099 MISC and Do I Need to Report It?

Many people who may have performed work or services for others may be a little surprised to find a Form 1099-MISC in their mailbox at the beginning of the year. The Form 1099-MISC is used by businesses of all sizes to report money that they paid out to non-employees. Non-employees are usually independent contractors. If you get a Form 1099-MISC, hold on to it because you will need it in order to properly file your federal (and most likely) state taxes.

You should get a Form 1099-MISC from any person or business that paid you $600 or more during the tax year as long as you were not an employee of that company or person. The earnings that they report on the Form 1099-MISC will also be reported to the IRS, so you have to add this amount to your gross income when doing your taxes. Gross income is any income regardless of the source and includes commissions and fees that you have charged someone.

The first thing to do is to check to make sure that information is correct, especially your Social Security Number or Tax Identification Number. People make mistakes, so double check this. Next, make sure that the amount reported in Box 7 is accurate. This is the amount paid to you for work or services you did for the payer. Check Boxes 4 and 11 to see if any taxes were withheld. Withholding is not typical for 1099-MISC as this form is to be used to “non-employees”.

If you worked on a fishing boat and received shares, check the amount in Box 5.

If you provided medical or health care services, check Box 6 to find out how much was paid for your services.

Box 9 is checked if $5000 or more in goods intended for resale were received by you with the intent to resell those goods in something other than a retail establishment. This usually applies to those who sell goods on a buy-sell, commission, or deposit-commission basis.

Box 10 will tell you how much crop insurance you were paid, if any.

Box 13 will tell you how much in legal services you were paid.

Form 1099-MISC is also used to report rents, royalties and certain other income.

Box 1 should contain the correct amount that was paid to you for rent of land, office space, equipment, or machinery.

Box 2 should contain the amount that you received from royalties that were $10 or more.

Box 3 is for “Other Income.” This can be anything from cash prizes to legal awards for punitive damages.

Any payments listed in Box 1 probably will require that you use Schedule E in order to report your rental income.

For those payments that are in Boxes 5, 6, 7 and 13, consider them self-employment income. Generally, you will need to fill out Schedule C or C-EZ as well as Schedule SE.

The IRS will get a copy of your 1099-MISC and will check it against your tax return to make sure that you are reporting all of your gross incomes. Do not try to stiff them because you could face some hefty fines.

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