IRS 1099 Guidelines

IRS Guidelines for Form 1099
Image Credit: David Sacks/Lifesize/Getty Images

The Internal Revenue Service considers Form 1099 an information reporting form. The information return is a required IRS document for reporting business transactions that occur during the tax year. The IRS uses the 1099 forms for reporting numerous kinds of transactions. You may receive these forms, but will not need to understand preparation for many, because large corporations and government entities mainly use them. Form 1099-MISC has an array of uses, including reporting nonemployee or independent contractor work in excess of $600, as of 2012. However, you may need to file this form if you operate a business.

Form 1099

The IRS uses the 1099-G for unemployment income and government payments. The 1099-R reports retirement benefits and 1099-INT reports interest payments. Form 1099-C is for cancellation of debt owed to a financial institution. Form 1099-DIV is common for reflecting dividend payments. Other 1099 special-purpose forms have different suffixes but the 1099-MISC is likely the only one you will need to file.

Form 1099-MISC

Complete the 1099-MISC form for all payments of more than $10 in royalties or at least $600 in rents, purchases or services, as of 2012. Any fishing boat proceeds or fish purchases require reporting on 1099-MISC as well as payments to an attorney of $600 or more. Use the 1099-MISC for federal backup withholding reporting, if you must withhold taxes of any amount. If you make sales in excess of $5,000 to someone for resale, you must issue a 1099-MISC if the recipient has no permanent retail establishment.

Business Reporting

Form 1099-MISC is for business reporting only. Do not report personal payments, as this is a business form. Business includes nonprofit organizations and employer's pension or profit sharing plans. You do not use this form for reporting payments to your personal attorney for personal business.


Do not use the Form 1099-MISC for wages paid to employees. Use the W-2 form for this purpose. If you have life insurance and similar benefits for employees, report these on Form W-2 as well. Use Form 1099-MISC for contract workers; do not withhold tax as contract workers pay their own taxes. Do not duplicate reporting. If you report on one form, do not repeat the information on another. Study the rules and ask questions. File your Form 1099-MISC forms timely and correctly. Penalties are $30 for each return if filed correctly within 30 days after the due date. Later filings incur penalties of $60 or $100 for each return, as of 2012.

Deceased Employees

An employee can receive a W-2 and a 1099-MISC in case of death. Report income earned before death on Form W-2. Payments made after death go to the estate on Form 1099-MISC. Whether you must withhold taxes depends on the year you made the after-death payment. Payments in the year of death require taxes withheld; payments in following years do not.

references & resources