How to Understand a 1099 MISC

Understanding what income is reported in each box of the 1099 MISC and how it may be reported on a tax return.

Difficulty: Moderate

Instructions

1. Box 1 of 1099 MISC is for income received from rent which is reported on Form 1040 Schedule E

2. Box 2 is for royalties income received which may be subject to self employment taxes, that are social security and Medicare taxes.

3. Box 3 is used for income from lottery, prizes, taxable damages and other amounts not qualified for other boxes.

4. Box 4 is for Federal Income Tax Withheld on Income included on the same 1099 MISC. This amount goes on one of the federal tax forms 1040.

5. Box 5 are for Fishing Boat Proceeds which are self employment income.

6. Box 6 are amounts received by a Physician or Health Care provider from a business

7. Box 7 is for income earned that is not wages from a employer. This income is self employed earnings. Examples are subcontractors, daycare providers, home health providers and newspaper carriers. This income is usually claimed on the tax form Schedule C and self employment taxes are paid on it.
   Income also which can be in Box 7 are earnings from Expense reimbursements and bonuses earned.

8. Box 8 is for substitute dividends or tax exempt payments received by the taxpayer broker on the taxpayer behalf after the transfer of his securities for use in a short sale.

9. Box 9 is an information box and not an income box.

10. Box 10 are amounts of income that was paid from crop insurance proceeds to a farmer. This income is reported on the farming tax form.

11. Box 13 is the amount of income from excess parachute payments that were received, there could be excise taxes paid on this amount.

12. Box 14 is for income paid to an attorney, examples are attorney fees that are paid from social security, settlements, and other gross proceeds.

13. Box 15 is for information.

14. Boxes 16, 17 and 18 are for state income tax withheld from income on the 1099 MISC.