How to Fill Out a 1099 Income Tax Form

Form 1099 is used by employers and individuals to report income paid to a contractor to the Internal Revenue Service. The IRS generally defines a contractor as a person who performs paid services for a client but is not under the direct control of the client; a clearly defined business and financial relationship does not exist between the two. You are required to report income paid to a contractor to the IRS and failing to do so may result in civil and criminal penalties.

• 1

  Enter the requested information on the left side of the form. Write the name of the payer of the income, either you or your business. List all requested contact, address and federal identification information.

  Insert the contractor's Social Security number for the Recipient's Identification Number if he does not have an Individual Taxpayer Identification Number, or ITIN. Write the contractor's name, address and personal information as requested on the form. The "Account number" section needs to be completed if you have more than one account with the contractor and are filing additional 1099 Forms for the same person. Use the account number you assigned the contractor in your records.

• 2

  Enter money paid to the contractor in the appropriate numbered box. Use Box 1 for rent you paid, including rents on coin-operated machines. Use Box 2 is for royalty payments, Box 4 for proceeds from fishing boat trips or Box 10 for farm crop proceeds. Write money paid to a health care professional for services in Box 6 and any compensation you paid the contractor, like commission, in Box 7. Use Box 8 for payments of $10 or more paid to broker for a customer instead of dividends. Enter gross legal fees paid to an attorney in Box 14.

  Enter direct income in Box 3 if the boxes listed above do not apply.

• 3

  Check Box 9 if you sold products to the recipient worth $5,000 or more for buy and sell purposes or a commission-based arrangement outside of a retail setting. List excess golden parachute payments, or money paid to a terminated employee under an employment agreement, in Box 13. Enter any Section 409A income, or money from deferred compensation plans that do not meet IRS requirements, in Box 15b.

• 4

  Skip Boxes 11 and 12; the boxes are reserved for the IRS. Box 15a may not apply to you if you are using Box 15b; check the current IRS procedures for this box on the official website of the IRS.

• 5

  Complete Boxes 16 through 18 if you wish to enter state information. The information is not required for the Form 1099 to be filed with a federal tax return. Enter any state tax you withheld in Box 16. Enter the payer's state abbreviation and identification number in Box 17 and the income for the state in Box 18.