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Step 1
Identify the parties. As the payer, you must provide the name, address and telephone number of yourself and the recipient. You must also have your federal employer identification number (EIN) and the taxpayer's identification, which is usually the social security number of an individual (or individual taxpayer identification number of a resident alien).
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Step 2
Report rents and royalties. Boxes 1 and 2 are for rents and royalties, respectively. Report any payment of rents $600 or more and any payment of royalties $10 or more. Rents includes office space, machines, gaming devices or other equipment rented as part of a profit-oriented business but do not include operator's fees (which are entered in box 7 as non-employee income). Royalties are usually reported by the agent who receives them on behalf
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Step 3
Enter any fishing boat proceeds in Box 5. Fishing boat proceeds refer to monies paid to the crew of a fishing vessel with a regular crew of 10 or less representing proceeds from the sales of a catch. These proceeds, however, are not wages or salary, which are reported on a W-2.
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Step 4
Declare medical and health care payments. If, as part of your trade or business, you made payments of more than $600 to a physician, health care provider or medical supplier, whether an individual or corporation, the amount of these payments are reported in Box 6. This requirement, however, does not include payments to pharmacies for prescriptions.
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Step 5
Quantify non-employee compensation. Payments made to contract workers or service providers (other than health care), prizes awarded, or any other compensation to an individual other than an employee should be declared in Box 7 if it is $600 or more.
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Step 6
Enter substitute payments. If your business is a brokerage and holds equities or securities on behalf of clients, enter payment made to these clients in lieu of interest or dividends paid to you for these investments held in your name in Box 8. Report substitute payments if they total $10 or more.
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Step 7
Report direct sales, crop insurance, golden parachute and attorney's fees. Less common, these payments are entered in Boxes 9, 10, 13 and 14, if any. An "X" is used to indicate direct sales of over $5,000 (but no dollar amount should be reported). Crop insurance of $600 or more paid to farmers by an insurance company should be reported, as should golden parachute payments in any amount.
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Step 8
Report other income. Any other income that is required to be reported on Form 1099-MISC (check the Guide in the Additional Resources section below) but which is not appropriate in any of the other boxes is reported in Box 3 if $600 or greater.
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Step 9
Enter withholding and state income. If the payments listed in the income boxes described above were subject to withholding, enter the amount of federal withholding in Box 4 and state withholding in Box 16. Enter the total amount of income reported on the form that was subject to state withholding in Box 17.
