November 15, 2022

Who Must File Forms 1099-MISC and 1099-NEC?

Corporations, partnerships, individuals, estates and trusts that receive services from vendors that meet stated threshold amounts during a calendar year must provide Forms 1099-MISC and 1099-NEC to the recipients of the income. Filers who have 250 or more forms must file the IRS copy of these returns electronically. In addition, taxpayers must file a companion Form 1096 with the IRS that summarizes the number and dollar amount of Forms 1099-MISC and 1099-NEC provided to recipients. 

What to Report on Form 1099-MISC

Amounts of $600 or More For:

• All types of rental payments, including equipment, pasture land, office space, etc.
• Payments to a physician, physicians’ corporation or other supplier of health and medical services. (Issued mainly by medical assistance programs or health and accident insurance plans.)
• Fish purchases for resale paid in cash
• Prizes and awards not for services, such as winnings on TV or radio shows
• Indian gaming profits paid to tribal members
• Exchanges of services between individuals in the course of their trades or businesses
• Crop insurance proceeds
• Fees and gross proceeds paid to all attorneys

Amounts of $10 or More For:

• Substitute dividends and tax-exempt interest payments reportable by brokers
• Royalties

All Amounts For:

• Payments to crew members by owners or operators of fishing boats, including payments of proceeds from sale of catch
• Section 409A income from non-qualified deferred compensation plans (NQDCs)

What to Report on Form 1099-NEC

• Amounts of $600 or more for payments for services performed for a trade or business by people not treated as its employees.
• Amounts of $5,000 or more for aggregated direct sales of consumer goods for resale.

What Not to Report on Form 1099-MISC and 1099-NEC

Don’t report payments made with a debit card, credit card or through another third party payer, such as Paypal, on Form 1099-MISC. The intermediary is required to report these transactions on Form 1099-K.

Additionally, don’t report payments to corporations, except in the case of attorney fees and health and medical payments. Also, don’t report payments that should be reported on any other informational form. (See our companion article Which Form 1099 Should I File?)

Potential Penalties

If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to penalty. Penalty amounts are based on when you file the correct return and range from $50-$290 per return with maximums reaching as high as $3.5 million. In addition, failure to file due to intentional disregard of the filing requirements carries a penalty of $580 per return with no maximum.