And not bogged down wondering who gets a 1099-MISC and who doesn’t! Basically, a Form 1099-MISC is given to non-employees such as independent contractors and other entities that your company pays over $600 to during the year.
The main recipients of this form are individuals or businesses that provide you services but they aren’t employees. Common examples are bookkeepers, cleaning services, IT support, maintenance services, and repairs and maintenance work. These payments go in box 7 for “non-employee compensation”. Payments for rent are also included on a 1099-MISC and go in box 1 for “rents”.
Less common recipients are the following:
Payments of royalties of $10 or more.
Prizes and awards, but not to employees.
Other income payments.
Medical and health care payments.
Crop insurance proceeds.
Cash payments for fish you purchase from anyone engaged in the trade or business of catching fish.
Payments to an attorney. They are separated into two different types: Fee and Gross Proceeds.
Cash paid from a notional principal contract to an individual, partnership, or estate.
Any fishing goat proceeds.
Now the fun part! Exceptions to the 1099-MISC Requirement:
Here are some general exceptions to the requirement that you must issue a 1099-MISC:
Corporations (including LLCs that are treated as an S or C Corporation. However, the exemption from reporting payments made to corporations does not apply to payments for legal services.
Payments for merchandise, telegrams (they still have these!?), telephone, freight, storage, and similar items.
Payments of rent to rental agents.
Payments of wages/salaries to employees and payments for business travel to employees (this includes other reimbursed employee expenses).
Cost of current life insurance protection. This can go on Form W-2 or 1099-R.
Don’t let 1099-MISC rules get you down. Know the requirements and let your heart be light this holiday season! Best wishes to you and your family.
Jordan Ilderton, CPA