This is another common question I get this time of year. First lets start with what is a Form 1099-MISC and who should receive one.
The form (PDF) reports payments for quite a few different things but most payments fall into a few categories. The most common reasons for issuing are:
- Box 1 – Payments of rents, for example rent paid to a landlord for office and retail space
- Box 2 – Royalties for writers, mineral rights, etc.
- Box 6 – Medical and health care payments
- Box 7 – Nonemployee compensation, shows payments made in the course of business to an individual or entity that provides services to a business. For example, a retail store may pay someone to clean their windows on a regular basis. If the total payments for the year equal or exceed $600 then the retailer is supposed to issue a Form 1099-MISC to the window cleaning service.
- Box 14 – Gross proceeds paid to an attorney
Who is required to send the form?
If a payment(s) are made in the course of a trade or business and equal or exceed the applicable dollar amount, then the payer (business) must complete a Form 1099-MISC. The payer sends the form to IRS and the recipient of the payment. The payer may also have to send copies to state tax departments. The general threshold is $600 but it is lower for payments to attorneys and for royalties and is $5,000 for direct sales of consumer products (box 9). There are some exceptions: generally payments to corporations and LLCs taxed as corporations are not subject to reporting. However, some payments to corporations are reported – such as those to attorneys and medical payments. The payer needs a Form W-9 on file to prove the entity they paid is a corporation or a LLC taxed as a corporation.
Finally, the question
Where’s your 1099-MISC form? It could be in transit as the form can be sent as late as January 31st and not be late. In addition, payers can ask for an extension from IRS causing a legal delay. The payer could be late sending the forms or just fail to comply with the law. It is also possible, the payer had the wrong address for you and either has not received the form back yet or decided not to find your correct address. Maybe you moved and did not tell the payer of your new address and the mail was not properly forwarded.
What do you do if you do not receive the Form 1099-MISC?
The Internal Revenue Code requires you to keep a set of books and records of all your income and deductions. Not receiving the 1099-MISC is not an excuse for not knowing how much you earned since you are required to track it yourself. In addition to the legal requirement, you should track it to make sure any form you receive has the correct amount on it. If the form shows more money than you received, check with the issuer/payer to get the form corrected. IRS puts a lot of faith in the forms but they are sometimes wrong. I see quite a few wrong ones every year.
The 1099-MISC is not attached to your return so no need to have it except in at least one situation. If the payer withheld federal or state income tax, you want the form to make sure the amounts are correct and that the payer reported the withholding to IRS and any applicable states. Federal withholding usually only applies when you are subject to backup withholding, a subject I will not get into here. If you are subject to backup withholding, you should already know that. State withholding is more common as many states require payers to withhold taxes on service providers who are not residents.
If you do not receive a 1099-MISC, check with the payer. If they issued on it is best to have a copy so you can make sure your records agree with the amount on the form. If they do not and you cannot get the form changed, then you need to be able to explain the difference. Other than human error, the most common difference is payments at the end of the year. The payer includes the payment on the form when they send payment while cash basis taxpayers include the payment when they receive it the next year.
If they payer says they did not issue a form 1099-MISC, then go with your records of what you received. Any penalties for not issuing a form are on the payer not the recipient.
Finally, do not obsess over not receiving a 1099-MISC. Your records (bank statements, invoices, etc.) are what you are required to keep.