Instructions For Form 1099-Misc - 2006 (Page 5 of 31) in pdf

pay per diem or mileage allowance. For more information, see

them to the service provider, report them on Form 1099-MISC

the Instructions for Forms W-2 and W-3, Pub. 463, Travel,

as part of the reportable payment. However, if sales taxes are

Entertainment, Gift, and Car Expenses, and Pub. 1542, Per

imposed on you (as the buyer) and collected from you by the

Diem Rates. For information on reporting employee moving

service provider, do not report the sales taxes on Form

expense reimbursements on Form W-2, see the Instructions for

1099-MISC.

Forms W-2 and W-3.

Statements to recipients. If you are required to file Form

Independent contractor or employee. Generally, you must

1099-MISC, you must provide a statement to the recipient. For

report payments to independent contractors on Form

more information about the requirement to furnish a statement

1099-MISC in box 7. See the instructions for box 7 on page

to each recipient, see part M in the 2006 General Instructions

MISC-5.

for Forms 1099, 1098, 5498, and W-2G.

2nd TIN not. You may enter an “X” in this box if you were

Section 530 of the Revenue Act of 1978 as extended by

notified by the IRS twice within 3 calendar years that the payee

TIP

section 269(c) of P.L. 97-248, deals with the

provided an incorrect TIN. If you mark this box, the IRS will not

employment tax status of independent contractors and

send you any further notices about this account. However, if

employees. To qualify for relief under section 530, employers

you received both IRS notices in the same year, or if you

must file Form 1099-MISC. Additional requirements for relief

received them in different years but they both related to

are discussed in Rev. Proc. 85-18, 1985-1 C.B. 518. Also, see

information returns filed for the same year, do not check the box

Notice 87-19, 1987-1 C.B. 455, for special rules that may apply

at this time. For purpose of the two notices in 3-year rule, you

to certain skilled workers, such as engineers, designers,

are considered to have received one notice. You are not

drafters, computer programmers, and systems analysts.

required to send a second “B” notice upon receipt of the second

Transit passes and parking for independent contractors.

notice. See Backup Withholding in the 2006 General

Although you cannot provide qualified transportation fringes to

Instructions for Forms 1099, 1098, 5498, and W-2G for more

independent contractors, the working condition and de minimus

information.

fringe rules for transit passes and parking apply to independent

contractors. Tokens or farecards that enable an independent

For information on the TIN Matching System offered by

contractor to commute on a public transit system (not including

TIP

the IRS, see the 2006 General Instructions for Forms

privately operated van pools) are excludable from the

1099, 1098, 5498, and W-2G.

independent contractor’s gross income and are not reportable

Account Number

on Form 1099-MISC if their value in any month is $21 or less.

However, if the value of a pass provided in a month is greater

The account number is required if you have multiple accounts

than $21, the full value is includible in gross income and is

for a recipient for whom you are filing more than one Form

reportable on Form 1099-MISC. The value of parking may be

1099-MISC. Additionally, the IRS encourages you to designate

excludable from an independent contractor’s gross income,

an account number for all Forms 1099-MISC that you file. See

and, therefore, not reportable on Form 1099-MISC if certain

part L in the 2006 General Instructions for Forms 1099, 1098,

requirements are met. See Regulations section 1.132-9,

5498, and W-2G.

Q/A 24.

Box 1. Rents

Directors’ fees. You must report directors’ fees and other

Enter amounts of $600 or more for all types of rents, such as

remuneration, including payments made after retirement, on

real estate rentals paid for office space (unless paid to a real

Form 1099-MISC in the year paid. Report them in box 7.

estate agent), machine rentals (for example, renting a bulldozer

Commissions paid to lottery ticket sales agents. A state

to level your parking lot), and pasture rentals (for example,

that has control over and responsibility for online and instant

farmers paying for the use of grazing land). If the machine

lottery games must file Form 1099-MISC to report commissions

rental is part of a contract that includes both the use of the

paid, whether directly or indirectly, to licensed sales agents. For

machine and the operator, the rental should be prorated

example, State X retains control over and liability for online and

between the rent of the machine (reported in box 1) and the

instant lottery games. For online ticket sales, State X pays

operator’s charge (reported as nonemployee compensation in

commissions by allowing an agent to retain 5% of the ticket

box 7).

proceeds the agent remits to State X. For instant ticket sales,

Public housing agencies must report in box 1 rental

State X pays commissions by providing tickets to the agent for

assistance payments made to owners of housing projects. See

5% less than the proceeds to be obtained by the agent from the

Rev. Rul. 88-53, 1988-1 C.B. 384.

sale of those tickets. If the commissions for the year total $600

or more, they must be reported in box 7 on Form 1099-MISC.

Coin-operated amusements. If an arrangement between

See Rev. Rul. 92-96, 1992-2 C.B. 281.

an owner of coin-operated amusements and an owner of a

business establishment where the amusements are placed is a

Escrow agent; construction project. When an escrow agent

lease of the amusements or the amusement space, the owner

maintains owner-provided funds in an escrow account for a

of the amusements or the owner of the space, whoever makes

construction project, performs management and oversight

the payments, must report the lease payments in box 1 of Form

functions relating to the construction project, and makes

1099-MISC if the payments total at least $600. However, if the

payments for the owner and the general contractor, the escrow

arrangement is a joint venture, the joint venture must file a

agent must file Form 1099-MISC for reportable payments of

Form 1065, U.S. Return of Partnership Income, and provide

$600 or more. This requirement applies whether or not the

each partner with the information necessary to report the

escrow agent is a bank. If the contractor is the borrower of the

partner’s share of the taxable income. Coin-operated

funds, do not report on Form 1099-MISC any loan payments

amusements include video games, pinball machines,

made to the contractor/borrower.

jukeboxes, pool tables, slot machines, and other machines and

Indian gaming profits, payments to tribal members. If you

gaming devices operated by coins or tokens inserted into the

make payments to members of Indian tribes from the net

machines by individual users. For more information, see Rev.

revenues of class II or class III gaming activities conducted or

Rul. 92-49, 1992-1 C.B. 433.

licensed by the tribes, you must withhold federal income tax on

such payments and file Form 1099-MISC.

Box 2. Royalties

File Form 1099-MISC to report the distributions to tribal

Enter gross royalty payments of $10 or more before reduction

members. Report the payments in box 3 and the federal income

for severance and other taxes that may have been withheld and

tax withheld in box 4. Pub. 15-A, Employer’s Supplemental Tax

paid. Use box 2 to report gross royalties (before reduction for

Guide, contains the necessary “Tables for Withholding on

fees, commissions, or expenses) paid by a publisher directly to

Distributions of Indian Gaming Profits to Tribal Members.”

an author or literary agent, unless the agent is a corporation.

State or local sales taxes. If state or local sales taxes are

The literary agent (whether or not a corporation) that receives

imposed on the service provider and you (as the buyer) pay

the royalty payment on behalf of the author must report the

MISC-3

Instructions For Form 1099-Misc - 2006 Page 5

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