Do LLC S Corporations Get a 1099? Everything to Know
Whether or not your LLC gets a 1099, or what the proper tax documents are for your particular business, can be the scariest things about being a business owner.3 min read
Do LLC S corporations get a 1099? Knowing whether or not your LLC gets a 1099, or what the proper tax documents are for your particular business, can be one of the scariest things about being a business owner. After all, there is so much to keep track of as a business owner, such as receipts, deductible expenses, and keeping track of which tax documents to file.
However, it is one you will need to be mindful of, as failure to file the appropriate forms can result in some pretty hefty fees which your company will have to pay. Also known as the Form 1099-MISC, this is a form that is needed to be filed with the Internal Revenue Service for a business’s vendors and contractors.
What Is the Form 1099?
The IRS classifies the Form 1099 as an “information return,” meaning that it is providing the agency with information regarding what you paid to your company’s independent contractors and who those contractors are. As such, it essentially serves the same purpose as the W-2 that would be filed by an employee, but as independent contractors are not classified as employees of the company, that particular form is irrelevant.
The business serves as the issuer of the Form 1099 and uses it as a means of showing expenses to the IRS, while the contractor is the payee, using the form as a means of demonstrating their taxable income. Generally speaking, a business is not required to file a 1099 regarding contractors to whom less than $600 was paid. Additionally, it is not required to provide 1099 for payments regarding personal matters, only professional ones.
While independent contractors may not receive a Form 1099 for payments under $600, you may still be required to pay taxes on it, so maintain your own books without just relying on receiving the necessary documents from clients.
In addition to the Form 1099-MISC, which is the one typically used by businesses, there is also:
- Form 1099-DIV. This form is used for capital gains and dividend distributions.
- Form 1099-S, which is used for real estate transactions.
The penalties for not filing the proper forms can vary, but they can definitely add up, causing a great deal of financial strain on your business. Fines can run between $30 to $100 per form, depending upon how far past the filing deadline you are. Additionally, if you or your company appear to simply be ignoring the filing requirements, then you can be hit with a minimum fine of $250, while the IRS can ultimately increase that amount as much as they want, as there is no maximum penalty.
If you are dealing with independent contractors who work as sole proprietors, then the issues of the Form 1099 are pretty cut and dry. You will provide them with their 1099, as they are then filing their own taxes as individuals. Unfortunately, if your contractor has their own LLC by which they do business, it is not so easy; it will essentially boil down to what type of LLC they are.
If established as a single-member LLC, they file their taxes as an individual, so you will provide them with the Form 1099. However, if your independent contractor has their business established as a corporation (either an S Corp or a C Corp), then for tax purposes, they would be considered as such, and would not typically be filing Form 1099s. While you could still go ahead and issue a Form 1099 to a corporation, it would really only be for the purposes of your own record-keeping, as it would not be needed by the corporation for their own tax or filing purposes.
It is important that Form 1099 contains all of the correct information as required by the IRS. That information includes:
- The name and the Social Security Number of the payee (independent contractor).
- If the contractor is an LLC who files their taxes individually, you will need the name of the LLC, along with their Employer Identification Number, which is also known as the EIN.
If you need help with figuring out whether you need to file a Form 1099 for an LLC, 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.