Do I Send a 1099 to an S Corp: Everything You Need to Know
The IRS uses Form 1099-MISC to track payments made to a contractor. This form helps the IRS know how much those self-employed contractors will pay in taxes.4 min read
2. Form 1099-MISC for Corporations
3. Business Services and 1099-MISCs
4. What Is the $600 Threshold?
5. What Information Is Required for Filing a 1099-MISC Form?
6. When Should You Issue a 1099-MISC?
7. What Is a 1099-K?
Updated July 8, 2020:
Do I send a 1099 to an S corp? If you've asked yourself this question, it's important to understand that you do not send 1099 forms to corporations. Rather, the IRS uses Form 1099-MISC to track payments made to a contractor or service provider. This form helps the IRS know how much those self-employed contractors will pay in taxes. There's also more than one type of 1099 form, so you need to know how and when you should file.
What Is the 1099-MISC Form?
The 1099-MISC form works like a W-2, but it's reserved for independent contractors. While the IRS requires you to issue 1099 forms to self-employed contractors, there are exceptions for S corporations. Most of the time, however, businesses issue the 1099-MISC forms for payments made directly to the contractors they used for business services during the tax year in question.
The business owner or company making payments to independent contractors is responsible for filing the 1099-MISC form with the IRS and sending a copy to the contractor. The independent contractor receives their copy of the 1099-MISC for their own records, while the IRS receives either an electronic filing or a paper copy along with a 1096 transmittal form reserved for snail mail filings.
Form 1099-MISC for Corporations
You are not required to send a 1099-MISC form to a corporation. This rule includes both C corporations and S corporations.
An easy way to remember the IRS rule is that corporations do not receive 1099 forms regardless of whether they are S or C corporations. Sole proprietors, partnerships, and unincorporated contractors do.
You should also issue 1099-MISC forms for:
- Lawyer fees, even if the attorney is incorporated.
- Payments made to for-profit medical providers.
- Gross proceeds paid to a lawyer, such as legal settlements.
The IRS exempts corporations from receiving the 1099 form because these entities are already subject to strict state and federal reporting and administrative requirements.
Business Services and 1099-MISCs
The IRS only requires 1099-MISC forms for services provided for your business, not for merchandise or goods. You do not need to send one for non-business reasons, including personal services.
For example, if you used a freelancer to design your website, you should issue the freelance designer a 1099-MISC form for their service. If you hired a landscaper to landscape your home's exterior, you do not need to issue a form because the service is non-business related. Remember, the person providing the service must not be an employee and be classified as an independent contractor when receiving a 1099-MISC form.
What Is the $600 Threshold?
You may have heard of the $600 threshold when researching 1099 forms. In general, companies are only required to file 1099-MISC forms if the contractor who completed a service was paid at least $600 in a single calendar year. Other types of payments also count toward the $600 threshold, including attorneys and medical care providers acting as corporations.
What Information Is Required for Filing a 1099-MISC Form?
To file a 1099-MISC form, you need information about your independent contractor. You can collect this information by having them fill out a W-9 form before they provide their services.
Essential pieces of information to collect include:
- The contractor's name.
- The contractor's business name if it differs from their name.
- The contractor's federal tax classification.
- Any exemption codes.
- The contractor's address.
- A tax identification number (i.e., Social Security Number or Entity Identification Number).
When Should You Issue a 1099-MISC?
Companies should issue 1099-MISC forms by January 31. You must send copies of the 1099-MISC to both the IRS and independent contractors. This also applies to those reporting non-employee compensation in the 1099's Box 7.
If your company issues more than 250 1099-MISC forms at once, you must e-file through the IRS website. The IRS prefers e-filing, so it's a good idea to file electronically even if you issue fewer than 250 forms.
What Is a 1099-K?
Some companies issue Form 1099-K, which is reserved for credit card or electronic payments made to contractors. This form has a higher threshold than the 1099-MISC, and third-party settlement organizations must issue the form after paying out $20,000 in more than 200 transactions.
If you need help with sending 1099s, 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.