Key Takeaways

  • S corporations are generally exempt from receiving Form 1099-MISC or 1099-NEC.
  • Exceptions apply to attorney and medical payments, which require 1099s even if the provider is an S corp.
  • Businesses must determine the recipient’s tax classification using Form W-9 before issuing a 1099.
  • S corps themselves may need to issue 1099s to eligible vendors, even if they do not typically receive them.
  • Failing to follow 1099 reporting rules can result in IRS penalties, even if an S corp is mistakenly issued one.

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.

You should still send a 1099-MISC to a single-member limited liability company or a one-person limited corporation (Ltd.), but not an LLC that has elected S corporation or C corporation status.

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.

Exceptions: When S Corps Must Receive a 1099

Although most S corporations are exempt from receiving 1099 forms, there are important exceptions where IRS regulations still require it:

  • Legal Services: Payments made to law firms or individual attorneys must be reported on Form 1099-NEC or 1099-MISC, even if the firm is incorporated as an S corp.
  • Medical and Health Care Payments: If a medical provider is paid more than $600 for services rendered and operates as an S corp, a 1099-MISC is still required.
  • Gross Proceeds to Attorneys: Payments of $600 or more that are not for services (e.g., legal settlements) must be reported, regardless of the attorney’s business structure.

These exceptions are designed to increase transparency and ensure proper tax reporting in industries where underreporting has historically been a concern.

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.

Why Most S Corps Are Exempt from 1099 Reporting

S corporations are not required to receive 1099 forms for most services because the IRS considers them to be more closely monitored for tax compliance. Unlike sole proprietors and partnerships, S corps must file annual corporate tax returns and meet stringent record-keeping standards.

Additionally, many businesses incorrectly issue 1099s to S corps, leading to unnecessary administrative work. However, the IRS does not penalize payers for sending a 1099 in error—it simply isn’t required unless an exception applies.

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.

Do S Corps Need to Issue 1099 Forms?

Even though S corporations are often excluded from receiving 1099s, they may still be required to issue them to contractors or unincorporated businesses they pay $600 or more in a year for services.

An S corp must file a 1099-NEC or 1099-MISC if:

  • It paid an independent contractor or sole proprietor $600+ for business-related services.
  • It made payments for rents, prizes, awards, or medical services.
  • It paid attorneys or law firms.

To ensure compliance, S corporations should collect a completed Form W-9 from each vendor before making payments, and file the appropriate 1099 forms by the January 31 deadline.

Frequently Asked Questions

  1. Do S corps get 1099 forms?
    Generally, no. S corporations are exempt from receiving 1099 forms, except in specific cases like legal and medical payments.
  2. When should I issue a 1099 to an S corp?
    Only if you paid them for legal services, gross legal proceeds, or certain healthcare-related services exceeding $600.
  3. Can I send a 1099 form to an S corp anyway?
    You can, but it’s usually unnecessary unless an exception applies. The IRS won’t penalize you for issuing one mistakenly.
  4. Do S corps need to file 1099s for their contractors?
    Yes. S corps must issue 1099-NEC or 1099-MISC forms to eligible vendors such as independent contractors and unincorporated service providers.
  5. How do I know if a vendor is an S corp?
    Request a completed Form W-9 from the vendor. It will indicate their federal tax classification, helping you determine 1099 requirements.

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