How to Fill Out a 1099 Form

Form 1099 from the IRS is used for reporting income received by independent contractors, freelance workers, and also used to report other forms of miscellaneous income. The 1099 form is used for non-employee income reporting as opposed to the W-2 form used to report employee wages. If any federal income tax has been withheld under backup withholding this must also be reported on a 1099. If you are an independent contractor you will need to provide your payer with a form W-9 for them to complete your 1099 form.

1099-MISC:

This is a commonly used form for reporting payments. It is used to report royalty payments over $10 or broker payments. This form is also used to report payments of over $600 in rent or services and those payments may include parts and materials payments. Prize winnings and awards, fishing boat proceeds and gross payments to attorneys are also reported on this form. The 1099-MISC form is also used to report direct sales of over $5,000 in consumer products when they are being purchased by a buyer for non-retail sales.

Box 2 of this form is used for entering royalty payments.

Box 3 is used for reporting prizes and awards that are not related to a service preformed, and not being paid to an employee. Box 3 is also used to report sweepstakes winnings but not used for reporting gambling winnings. Gambling winnings should be reported on form W-2G.

Box 5 of the 1099-MISC form is used to report fishing boat proceeds. The amount entered here would be from the share of earnings or fair market value of distribution in kind.

Box 7 is used for reporting awards that are given for service related activities. Examples of this are awards given to sales personnel for achieving goals or exceeding quotas. Box 7 is also used for professional service fees, accountant fees and expert witness fees.

1099-C:

I.R.S. form 1099-C is used for cancellation of debt reporting. This form is used by banks, credit unions, government agencies and other organizations that loan money on a significant basis. When a loan is forgiven the amount that is forgiven must be reported as income by the former borrower.

Other 1099 forms:

The 1099-R form is used for reporting payable death benefits from qualified plans. Some pension plans and retirement benefits are also reported on this form but this is undergoing change. Form 1099-DIV is used to report dividend earnings and 1099-INT is used for interest income.

If you are filling out a 1099 form for payments you have made be sure to enter all of your information correctly as well as entering your tax identification number. You must also enter the correct information of the person you made payment to. Double check to be sure that you provide their correct tax number as well. These forms must be sent to the payee by January 31^st of the year following payments and a copy must be sent to the I.R.S. by February 28^th. Form 1096 must be sent to the I.R.S. as well. Form 1096 lets the I.R.S. know what forms you are sending.

There are a large number of rules and regulations regarding form 1099. It is recommended that you fully study all of the current I.R.S. rules regarding the form or forms you need to use in your business. The general instructions for this form are over 6 pages in length but they can be downloaded in a PDF file from the I.R.S. online.

References:

http://www.irs.gov/pub/irs-pdf/i1099msc.pdf