By Sam Lipscomb, CEPF®
If you’re a contractor, freelancer or another type of self-employed individual, you’ll likely need to file IRS Form 1099-MISC. This form is used to report non-employee compensation, and it is part of the 1099 family of IRS tax forms. In fact, it’s one of the most commonly used 1099 forms. As its name suggests, the form is used to report miscellaneous income, which is why “MISC” is included in its title. Note that starting in the 2020 tax year, Form 1099-MISC will be changing to Form 1099-NEC.
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What Is Form 1099-MISC, and What Is It Used For?
IRS Form 1099-MISC is used to report income earned by those who are not employees of the company or organization that paid them. Taxpayers who might use the form include freelancers, sole-proprietors, self-employed individuals and independent contractors. The form must be filed by anyone who has received at least $600 in:
Form 1099-MISC should also be filed by anyone who received at least $10 in royalties or broker payments. Those who report more than $5,000 in consumer product sales designed to be resold by a non-permanent retail establishment must also file the form.
For the 2020 tax year, Form 1099-MISC will be changing to Form 1099-NEC, which stands for “non-employee compensation.” Taxpayers will use this new form to report non-employee payments in the same way that Form 1099-MISC is used currently. Because this form is new for tax year 2020, you won’t receive it until the beginning of 2021.Who Receives Form 1099-MISC?
As a freelancer or sole proprietor, you should receive a copy of Form 1099-MISC from any client who paid you at least $600 during the previous tax year. The form should show up within the first couple of months prior to Tax Day.
There are five separate copies of Form 1099-MISC, one of which is for IRS use only. Here’s a breakdown:
While IRS Form 1099-MISC won’t be around for much longer, it’s still important to understand how it works given that Form 1099-NEC will basically work the same in 2021 and beyond. Not everyone needs to worry about Form 1099-MISC. However, anyone who’s earned at least $600 in non-employee income should keep an eye out for their copy in the mail.Tips for Filing Your Taxes
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