When is a 1099-MISC Required?
Businesses need to file a 1099-MISC if any of the following payments are made in the course of doing business throughout a calendar year. Here is what the IRS says. Businesses must file a 1099-MISC if they:
- Paid $600 or more in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) purchased from anyone engaged in the trade or business of catching fish, or the cash paid from a notional principal contract (not common) to an individual, partnership, or estate
- Paid $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest
- Paid fishing boat proceeds
- Paid gross proceeds to an attorney
- Have direct sales of $5,000 or more of consumer products to a buyer for resale anywhere other than a permanent retail establishment
- Have individuals with federal tax withholdings because of backup withholding rules
What It Means for the Majority of Businesses
Contractors need 1099-MISC Forms. And if you’re doling out a bunch of prize money, better give those people a 1099 with their cash. Or if you fish for a living you need to use 1099-MISC.
It’s the most common 1099 form filed each year because of their use for contractors. Basically if you hire someone to do work for you, but they’re not considered an employee, and you pay them $600 or more throughout the calendar year, you need to file a 1099-MISC form, providing them copies and filing with the federal and/or state tax agencies.