Form 1099-MISC Filing Instructions for Box 8 or 10

Filing taxes without proper understanding of the forms can be a daunting task. In order to successfully navigate tax filing, it is essential to know your tax forms.  

One such essential form that businesses must be familiar with is Form 1099-MISC. This form is used to report various types of miscellaneous payments made throughout the tax year.  

Whether you’re paying independent contractors, covering rent, awarding prizes, or handling legal fees, Form 1099-MISC ensures that all these transactions are properly documented and reported to the IRS.  

In this blog, we’ll delve into the specifics of filing Form 1099-MISC, focusing particularly on Box 8 and Box 10.

What is Box 8 of Form 1099-MISC? 

Box 8 of Form 1099-MISC is used to report substitute payments of at least $10 in lieu of dividends or interest. These substitute payments typically occur when a broker loans out securities. Instead of the customer receiving the usual dividends or tax-exempt interest from their securities, they receive a substitute payment from the broker. 

In simple terms, if your securities are loaned out, the borrower pays the broker, and the broker then passes this payment on to you which is then to be reported in Box 8 of Form 1099-MISC.

Let’s take an example to understand it better. You lent out some of your stocks, and the borrower paid you $500 in substitute payments instead of dividends. In this case, you would report the $500 in Box 8 of Form 1099-MISC. 

Who Reports Box 8 on Form 1099-MISC? 

The broker or financial institution that handled the securities lending transaction reports the substitute payments in Box 8 of Form 1099-MISC. 

Filing instructions for Box 8 of Form 1099-MISC 

Step 1:
Fill in the payer’s (your business entity) name, address, and taxpayer identification number (TIN). 

Step 2:
Enter the recipient’s (broker) information such as name, address, and TIN.  

Step 3:
Enter the total amount of substitute payments in lieu of dividends or tax-exempt interest. 

What is Box 10 of Form 1099-MISC? 

If your business has engaged in the legal services of an attorney or a law firm, you are required to report any gross proceeds exceeding $600 in the past tax year, regardless of whether the services are performed or not.  

The “services” mentioned are for legal services, not for the attorney’s services. Payments for an attorney’s services will be used in Box 1 of Form 1099-NEC. 

For example,
Scenario: You are a business owner who paid $10,000 to an attorney as part of a settlement agreement in a lawsuit. You would report the $10,000 in Box 10 of Form 1099-MISC.
However, if you hired an attorney to provide legal advice and services for your business throughout the year, you paid the attorney $5,000 for these services. You are required to report the $5000 in Box 1 of Form 1099-NEC as nonemployee compensation. 

Filing instructions for Box 10 of Form 1099-MISC 

Step 1:
Fill in the payer’s (your business entity) name, address, and taxpayer identification number (TIN). 

Step 2:
Enter the attorney’s name, address, and TIN.  

Step 3:
Determine the total amount of payments made to the attorney and fill in Box 10.  

Understanding the specific requirements for reporting payments on Form 1099-MISC is crucial for compliance with IRS regulations. By providing accurate information in the relevant boxes, businesses can ensure they meet their tax obligations and avoid any penalties.