Form 1099-M
Miscellaneous Income
Purpose of the form:
The taxpayer must file this form for each person to whom, the taxpayer paid during the year.
- At least $10 in Royalties or broker payments in lieu of dividends or tax exempt interest.
- At least $600 in rents , services , prizes and awards , other income payments , medical and health care payments , crop insurance proceeds, or cash payments for fish.
- Any fishing boat proceeds, or
- Gross proceeds to an attorney.
Moreover, the taxpayer can use 1099-M to report that he made direct sales of at least $5000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
The taxpayer must also file Form 1099-M for each person from whom he has withheld federal income tax under the backup withholding rules regardless of the amount of the payment.
Trade or business reporting only:
Report on form 1099-M only when payments are made in the course of his trade or business. Personal payments are not reportable.
Exceptions:
Some payments are not required to be reported on Form 1099-M, although they may be taxable to the reciepent.payemnts for which a Form 1099-M is not required include:
- Payments to a corporation but certain exceptions do apply.
- Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
- Payments of rents to real Estate agents.
- Wages paid to employees.
- Business travel allowances paid to employees.
- Costs of current life insurance protection.
- Payments to a tax exempt organization, the United States, the District of Columbia, a U.S possession or a foreign government.
- Certain payment card transactions if a payment card organization assigned a merchant/ payee a Merchant category code indicating that reporting is not required.
- Fees paid to informers.
- Scholarship or fellowship grants.
- Difficulty of care payments those are excludable from the recipient’s gross income.
- Cancelled debts are not required to be reported on form 1099-M.
- Employee business expense reimbursements.
Fish purchases:
If the taxpayer is in the trade or business of purchasing fish for resale , the total cash payments of $600or more paid during the year to any person who is engaged in the business of catching fish must be reported in form 1099-M.
Deceased Employee wages:
If an employee dies during the year, the employer must report the accrued wages , vacation pay , and other compensation paid after the date of death.
For more details refer instructions of form 1099-M.
