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Not-for-Profit Enews Update: Information on Form 1099-MISC (Part II)

January 16, 2014


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Note: This article continues a three-part series discussing Form 1099-MISC. This is the second in the series.

Last week we reviewed the basic filing requirement of the Form 1099-MISC along with the filing deadlines and penalties for failure to file. This week we will focus on a few of the boxes on the Form 1099-MISC that are generally required to be completed.


BOX 1 – RENTS

Box 1 is where you report payments of $600 or more made for all types of rents if paid directly to the property owner. Rents paid to a real estate agent who in turn remits them to the owner are not reported. Rents paid to an equipment operator must be prorated between the machine rental, which is reported in box 1, and the operator's labor charges (nonemployee compensation is reported in box 7).


BOX 2 – ROYALTIES

Any royalty payments made of $10 or more for such things as patents, copyrights, trade names, and trademarks are reported in box 2.


BOX 3 – OTHER INCOME

This is often referred to as the catch all box. It is in this box that you report payments of $600 or more that is not reportable in one of the other boxes. Amounts reported in box 3 are not subject to self-employment taxes so it is important to properly report amounts in this box.


Some examples of amounts to report in box 3 include the fair market value of a prize or award that is not a payment for services rendered nor is it a payment made to an employee. This is also the box where you report amounts paid to a contest winner in which the winner did not purchase a ticket to enter or make any type of wager. (If a wager was made, report the winnings on Form W-2G, Certain Gambling Winnings.)


Box 3 is used to report the payment of accrued wages, vacation pay, and other compensation paid to a deceased employee's estate or beneficiary the year after the year of death. (If the payment for accrued wages, vacation pay, and other compensation is paid to a deceased employee's estate or beneficiary in the year of death, social security and Medicare taxes must be withheld and the amount reported on the employee's Form W-2.)


Finally, death benefits from a nonqualified deferred comp plan or Section 457 plan paid to the estate of beneficiary of a deceased employee are also reported in box 3. (Benefits from a qualified plan are reported on Form 1099-R.)


BOX 4 – FEDERAL INCOME TAX WITHHELD

When a person has not furnished their correct taxpayer identification number to the nonprofit organization, the nonprofit is subject to income tax withholdings on most payments. The amount of the tax withheld is entered in box 4.


We will complete our overview of the Form 1099-MISC next week with a review of box 6, 7 and 14.

 

If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at blue@blueandco.com or call us at 800-717-BLUE.