What Is the 2020 Form 1099-MISC Used For?

Form 1099-MISC is an information return used by businesses to report various payments made during a calendar year. These forms provide the Internal Revenue Service (IRS) and recipients with information about income that may not be subject to withholding, such as rent or royalties. Reporting these payments helps the IRS track income and verify that recipients are reporting their earnings correctly. Businesses use the information to document deductible expenses.

The Major Change for Reporting Income

A major change occurred with the reintroduction of Form 1099-NEC, Nonemployee Compensation, for the 2020 tax year. Before this, payments to independent contractors were reported in Box 7 of Form 1099-MISC, which created confusion because the form had multiple deadlines depending on the type of payment reported. To resolve this, the IRS brought back Form 1099-NEC specifically to report nonemployee compensation.

Businesses must now use Form 1099-NEC to report payments of $600 or more to independent contractors for services. Consequently, Form 1099-MISC was redesigned, with box numbers rearranged to remove nonemployee compensation.

Who Must File Form 1099-MISC

Any person or entity engaged in a trade or business, including for-profit businesses and nonprofit organizations, that makes certain types of payments must file Form 1099-MISC. Personal payments not made in the course of a trade or business are not reportable.

A Form 1099-MISC is required if you have paid at least $600 in rents, prizes and awards, or other income payments. A lower threshold of $10 applies to royalty payments. These thresholds apply to the total amount paid to a single recipient for the year. For example, if a business pays $50 a month in rent for a storage unit, totaling $600 for the year, a Form 1099-MISC must be filed.

Information Required to Complete the Form

To complete a Form 1099-MISC, you must have the recipient’s correct name, address, and Taxpayer Identification Number (TIN). To collect this information, have the recipient complete and sign an IRS Form W-9, Request for Taxpayer Identification Number and Certification, before you make the first payment.

Form 1099-MISC requires specific payments to be reported in designated boxes. Box 1 is for reporting rental payments for real estate, machinery, or equipment. For instance, if your business paid rent for its office space directly to the property owner, that amount would be reported here. Box 2 is for reporting gross royalty payments from intellectual property, such as patents and copyrights, or from oil, gas, or mineral properties.

Box 3, “Other Income,” is for payments not classifiable elsewhere on the form or on another specific 1099. This can include prizes and awards that are not for services, such as winnings from a raffle, or payments to an estate after the year of death. Other notable boxes include Box 9 for crop insurance proceeds and Box 10 for gross proceeds paid to an attorney.

The Filing Process

For the 2024 tax year, copies of Form 1099-MISC must be sent to recipients by January 31, 2025. The deadline to file with the IRS is February 28, 2025, for paper filers and March 31, 2025, for electronic filers. For comparison, Form 1099-NEC must be sent to recipients and filed with the IRS by January 31, 2025.

The IRS requires electronic filing for those who file 10 or more information returns in total during the year, including forms like the 1099-MISC and 1099-NEC. This makes electronic filing the standard method for most businesses. The IRS’s electronic system is called Filing Information Returns Electronically (FIRE).

For the few who are eligible to file by mail, the paper method requires sending scannable red Copy A of the forms to the IRS. When paper filing, you must also complete and send Form 1096, Annual Summary and Transmittal of U.S. Information Returns, which summarizes the information from all the 1099 forms you are filing.

Receiving a Form 1099-MISC

You should review a Form 1099-MISC you receive to ensure all the information, including your name, TIN, and the payment amount, is accurate. If you find an error, contact the payer who issued the form and request a corrected version.

The income reported on Form 1099-MISC must be included on your tax return. The type of income determines where it is reported. For example, rental income from real estate reported in Box 1 and royalties from Box 2 are reported on Schedule E (Form 1040). Payments reported in Box 3 for “Other Income” are included on the “Other Income” line of Schedule 1 (Form 1040).