Are S Corps 1099 Reportable: Everything You Need to Know
You may wonder, "Are S Corps 1099 reportable?" As an S Corporation, if you have utilized independent contractors, it is very likely you will have form 1099 reporting requirements.3 min read
Are S Corps 1099 Reportable
You may wonder, "Are S Corps 1099 reportable?" As an S Corporation, if you have utilized independent contractors, it is very likely you will have form 1099 reporting requirements.
Form MISC 1099's serve several purposes. The 1099 allows the independent contractors to properly account for and report their income, as well as the businesses they contract with to measure their contractor expenses. The 1099 also allows the IRS to properly measure and verify independent contractor income and payments.
1099s are for the specific purpose of reporting transactions to contractors in exchange for various non-employee services.
The IRS uses 1099s to make sure taxes are being properly paid from contractors and small business owners. When people are working for themselves as a contractor or small business, the contractor or small business owner needs to keep track of and pay their required taxes on their own. The 1099 form helps them do so and allows the IRS to know how much tax to be looking for.
There are several 1099 MISC forms depending on circumstance.
It is essential to understand how 1099s work, when to send them, and which ones to send.
The penalties for incorrect 1099 form filing and reporting can be significant.
When you fill out your business tax return you also will be required to certify you issued all forms required, such as 1099 MISC.
The IRS generally does not require Form 1099 MISC to be issued to corporations for services, but nonetheless all other business forms are required to have Form 1099 MISC reporting. These include company forms such as:
• Sole Proprietors
• General Partnerships
You may be surprised at the extent of companies and individuals that qualify for 1099 MISC, which is why it's important to understand its mechanisms well.
When preparing your 1099 MISC you will need the information provided by the contractor or company in a W-9. It is far easier to get the W-9 information early on before beginning to pay the contractor.
The IRS has standard and current W-9 forms on their website. You should use these as they are up-to-date and required.
If your contractor says on their W-9 that they are an individual, LLC, or partnership, they will need to be sent a MISC 1099.
If the W-9 is not properly filled out or the vendor does not give you their EIN, the IRS will need to you to withhold 25% of the payments.
How to Determine Who Receives a 1099
The first step in determining your 1099 reporting requirements is to figure out which entities you have relations with that could be considered vendors or contractors. Then determine what kind of entity type they are and if they are an organization or person that needs a 1099 MISC. Employees will not need 1099 MISCs, as do certain exempt corporations.
The next step is to then sum up the payments you have made to that person or organization. 1099s are only required to be issued above a certain threshold, currently $600.
A common mistake is forgetting to give 1099s to lawyers. If you used legal services, you should use and send a 1099 MISC.
Most companies you contract with will also require a 1099 MISC from your business. However if the company is a corporation, under most circumstances, it will not need a 1099.
It is better to file a 1099 than to not file one when it is required. It is better to err on the side of sending a 1099, as the penalties can be significant for non-filing.
Fines for failing to file 1099s properly can accumulate rapidly per form, although there is a maximum limit.
You can be fined for both not reporting the form to the IRS as well as not sending it to the person you were required to send it to.
Both the contracting party and the IRS are entitled to a Form 1099 MISC. There are both electronic reporting options as well as reporting by mail.
If you need help with preparing your Form 1099 MISC, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with, or on behalf of companies like Google, Menlo Ventures, and Airbnb.