Instructions For Form 1099-Misc - 2006 (Page 6 of 31) in pdf

gross amount of royalty payments to the author on Form

and stomach disorders, are not considered received for a

1099-MISC whether or not the publisher reported the payment

physical injury or physical sickness and are reportable unless

to the agent on its Form 1099-MISC. Do not include surface

described in b or c above. However, damages received on

royalties. They should be reported in box 1. Do not report oil or

account of emotional distress due to physical injuries or

gas payments for a working interest in box 2; report payments

physical sickness are not reportable.

for working interests in box 7. Do not report timber royalties

Also report liquidated damages received under the Age

made under a pay-as-cut contract; report these timber royalties

Discrimination in Employment Act of 1967.

on Form 1099-S, Proceeds From Real Estate Transactions.

Taxable back pay damages may be wages and

Box 3. Other Income

TIP

reportable on Form W-2. See Pub. 957, Reporting Back

Pay and Special Wage Payments to the Social Security

Enter other income of $600 or more required to be reported on

Administration.

Form 1099-MISC that is not reportable in one of the other

2. Payments of $600 or more to any one patient or member

boxes on the form.

in a Department of Veterans Affairs (VA) hospital or domiciliary

Do not include mileage reimbursements to charitable

under the VA’s therapeutic or rehabilitative programs. See Rul.

volunteers to the extent the reimbursement was:

65-18, 1965-1 C.B. 32.

CAUTION

3. Payments as explained on page MISC-2 under Deceased

•

For expenses for relief relating to Hurricane Katrina

employee’s wages.

during the period beginning August 25, 2005, and ending

4. Payments as explained on page MISC-3 under Indian

December 31, 2006,

gaming profits, payments to tribal members.

•

For the operating expenses of a passenger automobile that

5. Termination payments to former self-employed insurance

the volunteer has substantiated with adequate records,

salespeople. These payments are not subject to

•

Related to expenses that were for the benefit of and

self-employment tax and are reportable in box 3 (rather than

reimbursed by a charitable organization as described in section

box 7) if all the following apply:

170(c), including public charities and private foundations,

•

Not in excess of the standard business mileage rate at the

a. The payments are received from an insurance company

time the automobile was used to provide the relief, and

because of services performed as an insurance salesperson for

•

Not compensation for the performance of services.

the company.

b. The payments are received after termination of the

Also enter in box 3 prizes and awards that are not for

salesperson’s agreement to perform services for the company.

services performed. Include the fair market value (FMV) of

c. The salesperson did not perform any services for the

merchandise won on game shows. Also include amounts paid

company after termination and before the end of the year.

to a winner of a sweepstakes not involving a wager. If a wager

d. The salesperson enters into a covenant not to compete

is made, report the winnings on Form W-2G, Certain Gambling

against the company for at least 1 year after the date of

Winnings.

termination.

If, not later than 60 days after the winner becomes

e. The amount of the payments depends primarily on

TIP

entitled to the prize, the winner can choose the option of

policies sold by the salesperson or credited to the salesperson’s

a lump sum or an annuity payable over at least 10

account during the last year of the service agreement or to the

years, the payment of winnings is considered made when

extent those policies remain in force for some period after

actually paid. If the winner chooses an annuity, file Form

termination, or both.

1099-MISC each year to report the annuity paid during that

f. The amount of the payments does not depend at all on

year.

length of service or overall earnings from the company

(regardless of whether eligibility for payment depends on length

Do not include prizes and awards paid to your employees.

of service).

Report these on Form W-2. Do not include in box 3 prizes and

If the termination payments do not meet all these

awards for services performed by nonemployees, such as an

requirements, report them in box 7.

award for the top commission salesperson. Report them in

box 7.

Box 4. Federal Income Tax Withheld

Prizes and awards received in recognition of past

Enter backup withholding. For example, persons who have not

accomplishments in religious, charitable, scientific, artistic,

furnished their TIN to you are subject to withholding at a 28%

educational, literary, or civic fields are not reportable if:

•

rate on payments required to be reported in boxes 1, 2 (net of

The winners are chosen without action on their part,

•

severance taxes), 3, 5 (to the extent paid in cash), 6, 7 (except

The winners are not expected to perform future services, and

•

fish purchases for cash), 8, 10, and 14. For more information on

The payer transfers the prize or award to a charitable

backup withholding, see the 2006 General Instructions for

organization or governmental unit under a designation made by

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

the recipient. See Rev. Proc. 87-54, 1987-2 C.B. 669.

Also enter any income tax withheld from payments to

Other items required to be reported in box 3 include the

members of Indian tribes from the net revenues of class II or

following:

class III gaming activities conducted or licensed by the tribes.

1. Generally, all punitive damages, any damages for

nonphysical injuries or sickness, and any other taxable

Exception

damages. Report punitive damages even if they relate to

Regulations section 31.3406(g)-1(f) provides that backup

physical injury or physical sickness. Generally, report all

withholding is not required for certain payment card

compensatory damages for nonphysical injuries or sickness,

transactions if:

•

such as employment discrimination or defamation. However, do

The payment is made through a payment card organization

not report damages (other than punitive damages):

that is a Qualified Payment Card Agent as described in Rev.

a. Received on account of personal physical injuries or

Proc. 2004-42, which is on page 121 of Internal Revenue

physical sickness;

Bulletin 2004-31 at ,

•

b. That do not exceed the amount paid for medical care for

The payment is made on or after January 1, 2005, and

•

emotional distress; or

The requirements of Regulations section 31.3406-1(g) are

c. Received on account of nonphysical injuries (for

met.

example, emotional distress) under a written binding

Box 5. Fishing Boat Proceeds

agreement, court decree, or mediation award in effect on or

issued by September 13, 1995.

Enter the share of all proceeds from the sale of a catch or the

Damages received on account of emotional distress,

FMV of a distribution in kind to each crew member of fishing

including physical symptoms such as insomnia, headaches,

boats with normally fewer than 10 crew members. A fishing

MISC-4

Instructions For Form 1099-Misc - 2006 Page 6

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