You must generally report a payment as non-employee compensation if:

  • You made the payment for services in the course of your trade or business.
  • You made the payment to someone who is not your employee.
  • You made the payment of at least $600 during the year to an individual, partnership, estate, or, in some cases, a corporation (ex: attorney)

You will need to file Form 1099-MISC on or before January 31th, for each person to whom you have paid during the preceding year:

  • At least $10
    • Royalties or broker payments in lieu of dividends or tax-exempt interest (box 2);
    • Substitute payments in lieu of dividends or interest (box8)
  • At least $600 in:
    • Rents (box 1);
    • Other income (box 3):
      • prizes and awards (boxes 3 and 7);
      • generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
      • other income payments that are not reportable in any other boxes;
    • Fishing boat proceed (box 5)
    • Medical and health care payments (box 6);
    • Non employee compensation (box 7):
      • services performed by someone who is not your employee (including parts and materials);
      • Payments to an attorney. The term “attorney” includes a law firm or other provider of legal services;
      • cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;
    • Crop insurance proceeds (box 10);
    • Excess golden parachute payments (box 13);
    •  Gross proceeds paid to an attorney (box 14): report payments that are made to an attorney, for example, as in a settlement agreement; those are not reportable in box 7.
  • Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale (box 9);

Use Form W-9 to request the taxpayer identification number (TIN) whenever you bring someone on board as a freelancer/contractor/non-employee. The W-9 will show the Social Security Number of the individual or the Employer Identification Number (EIN) of his corporation.

I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.

Please do not hesitate to contact me should you have any question