The most popular box on the Form 1099-MISC is box 7, which is for non-employee compensation.
In most cases, you must report a payment as non-employee compensation if it meets all four of the following conditions. You made the payment:
- To someone who is not your employee
- For services in the course of your trade or business (including government agencies and nonprofit organizations)
- To an individual, partnership, estate, or, in some cases, a corporation
- To the payee for at least $600 during the year
Below are examples of types of payments that might show in box 7 of the 1099-MISC:
- Professional service fees, such as fees to attorneys (including corporations), accountants, architects, contractors, engineers, and so on.
- Fees paid by one professional to another, such as fee-splitting or referral fees.
- Payments by attorneys to witnesses or experts in legal adjudication.
- Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. For example, report the total insurance company payments to an auto repair shop under a repair contract showing an amount for labor and another amount for parts, if furnishing parts was incidental to repairing the auto.
- Commissions paid to nonemployee salespersons that are subject to repayment but not repaid during the calendar year.
- A fee paid to a nonemployee, including an independent contractor, or travel reimbursement paid for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600.
- Payments to non-employee entertainers for services. Use Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, for payments to nonresident aliens.
- Exchanges of services between individuals in the course of their trades or businesses. For example, an attorney represents a painter for nonpayment of business debts in exchange for the painting of the attorney's law offices. The amount reportable by each on Form 1099-MISC is the fair market value of their own services performed. However, if the attorney represents the painter in a divorce proceeding, this is an activity that is unrelated to the painter's trade or business. The attorney must report on Form 1099-MISC the value of their services. But the painter need not report on Form 1099-MISC the value of painting the law offices because the work is in exchange for legal services that are separate from the painter's business.
- Taxable fringe benefits for non-employees.
- Gross oil and gas payments for a working interest.
- Payments to an insurance salesperson who is not your common law or statutory employee.
- Director fees.
- Commissions paid to licensed lottery ticket sales agents.
- Payments to section 530 (of the Revenue Act of 1978) workers.
- Fish purchases for cash.
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