1099-MISC Tax Rules: Breaking Down the 1099-MISC Form

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.