Form 1099-Misc
What it is:
According to the IRS, a Form 1099-Misc is appropriate for reporting the following:
- Payments of $600 or more for services performed for a trade or business by people not treated as its employees (such as subcontractors).
- Prizes or awards ($600 or more)
- State and federal tax withheld in conjunction with any of the other activities reportable on the form.
- Rent payments
- Royalty payments ($10 or more)
- Substitute dividend and tax-exempt interest reportable by brokers ($10 or more).
- Payments to a physician, physician's corporation or other supplier of health and medical services, issued mainly by medical assistance programs or health and accident insurance plans ($600 or more).
- Payments to fishing boat crew members coming from sale of catch.
- Crop insurance proceeds.
How it works (Example):
Let's say John Doe has a job at XYZ Company, but he freelances on the side for Company ABC. He earns $100,000 from XYZ Company and $5,000 from Company ABC.
Because John Doe is an employee of XYZ Company, he receives a Form W-2 reflecting his $100,000 of earnings. However, Company ABC also sends him (and the IRS) a Form 1099-Misc reflecting his $5,000 of miscellaneous earnings.
