- January 12, 2021
The Internal revenue system has released its instruction to fill the form 1099- MISC for the year 2021 that pertains to non-employee compensation. A business owner should file Form 1099-NEC against the compensation (at least $600) that is been paid to contract laborers who are not the direct employees of a business. Other payments greater than $600 that is paid in the course of the business such as rent and ‘other income payment’ should be reported under Form 1099-MISC.
Step by Step Breaking Down the 1099 Form
Freelancer and contract workers who receive a payment of more than $600 a year are liable to fill the form 1099- MISC, in which they list the earnings that are categorized as miscellaneous income, opposed to employee income. Employers who hire a contractor and pay them more than $600 during the tax year should also file Form 1099- MISC.
In general, the form 1099- MISC is very straightforward and is easy to fill. Payers will have to enter their earnings in only one box, but each of the boxes in the form denotes a different form of income.
| Box | Item description | Information
|
| Box 1 | Rents | Denotes the rent paid to the filer |
| Box 2 | Royalties | Royalties received |
| Box 3 | Other Income | Income earned from winning a prize |
| Box 4 | Federal income | To report withheld federal income tax |
| Box 5 | Fishing | To report money earned from fishing and fishing boat proceeds |
| Box 6 | Medical and health care | To report money received to pay for health care |
| Box 7 | Non-employee compensation | To report earnings for contract work |
| Box 8 | Substitute payments | Payments are greater than $10 that is received in place of dividends and interest. |
| Box 9 | Payer made direct sales of $5000 | This box will be checked if the payer is involved in the direct sales of a company for over $5000. |
| Box 10 | Crops insurance | The income of more than $600 paid to farmers by insurance companies |
| Box 11 | Foreign tax | Denotes foreign tax paid on the income that is listed on Form 1099. |
| Box 12 | Country name | The name of the country that you paid the tax, mentioned in box 11. |
| Box 13 | Golden parachute payments | Includes payments that are made more than the allowable amount on cash bonuses, stock options, termination payments, etc. |
| Box 14 | Proceeds paid to an attorney | Includes income of $600 or more that is paid to an attorney. |
| Box 15 | Section 409 A deferrals | Denotes the contributions made against the section 409A retirement plan |
| Box 16 – 18 | IT withheld | Provided to conveniently track the information on state income tax details. |
The form 1099- MISC is used to file the IT returns of non-contractual employees who are not on the regular payroll of a company. This form is also used to report expenses that are related to a business. Depending on the nature of the business, one can receive many 1099-MISC forms. They can combine the income listed into a single schedule C form for a single business. Those having several businesses should file a separate Schedule C for each of them.
