Do S Corps Get 1099: Everything You Need to Know
Do S corps get 1099 forms sent to them? In most cases, these forms do not need to be sent to corporations. 4 min read
2. Exceptions to the 1099 Rules
3. The $600 Threshold Rule
4. Completing the 1099 Form
5. Tips for 1099 Filings
6. Change in 1099 Reporting for Corporations
Do S corps get 1099 forms sent to them? In most cases, these forms do not need to be sent to corporations. This is the same for both C and S corporations. A 1099-MISC form is primarily used to report payments made to non-employees, like a contractor or service provider.
1099-MISCs are the equivalent of a W-2 for independent contractors, the IRS uses these to track the taxes they should get from people who are self-employed. 1099-MISCs need to be sent to single-member LLCs, but not to one that has S or C corporation status.
Below is a quick guide:
- Sole proprietor — 1099-MISC
- Private contractor or LLP/partnership — 1099-MISC
- LLC with S or C corporation status — No 1099-MISC
The business that made the payment to the independent contractor is the one who must report the payments to the IRS, and then send a copy to the provider.
Exceptions to the 1099 Rules
There are some exceptions to the general rules:
- 1099-MISCs are issued for payment of attorney fees (even for corporations)
- Any gross proceeds paid to an attorney (typically for claim settlements)
- Any payments made to for-profit medical care providers
1099-MISCs are applicable for services, not for merchandise or goods purchased. They are not required for services that are considered personal and unrelated to the business.
The $600 Threshold Rule
In most cases, companies only need to send 1099-MISCs to a contractor who has received more than $600 in payments for a calendar year. If a company pays with a credit card or uses a third party network, they would send a 1099-K, not the 1099-MISC.
1099s you must send are as follows:
- For debt over $600 that is owed to you by an S corporation —1099-C
- S corporations who sell or abandon secure property to you — 1099-A
- Barter exchanges you make with S corporations — 1099-B
- Merchant card or third party network payments you make to S corporations that exceed $20,000 or 200 transactions — 1099-K
Completing the 1099 Form
To file a 1099-MISC you will need information about the contractor first. This information comes from a W-9 that a contractor fills out prior to beginning work.
Companies are required to send 1099-MISCs by January 31st of the following year. Be aware that some states have separate deadlines and filing requirements for 1099s. If you have any questions, speak with a tax advisor to confirm specific state requirements.
Tips for 1099 Filings
Prep 1099 filings early as you may miss the deadline if you realize late in the year that you are missing payment or contractor information. You can personally file and deliver 1099s which requires you to prepare, print, deliver, and file everything. This option is advisable for those who issue only a few 1099s per year.
For companies who manage thousands of contractors, look for a 1099-MISC filing service to assist with the process. The last option is to hire a professional tax advisor or CPA.
Failing to file 1099s by the deadline can result in hefty fines. Penalties can range from $50 to $260 per instance, per form, with a maximum penalty of $3,193,000.
Be cautious when determining whether to issue a 1099 if you are unsure if a company has S corporation status. If the company is not an S corp, then you will use the W-9 to finish the 1099-MISC. The W-9 can also be used to prepare a 1099-C, 1099-S, or 1099-K.
Employees who are either part time or full time have earnings reported through the company's payroll department who is withholding federal, state, and local taxes every time the employee is paid. There is no need to do any other reporting for employees.
Examples of non-employees who require a 1099:
- Outside accountants
- Commission-based salespeople
- Independent contractors
- Private janitorial services
Change in 1099 Reporting for Corporations
As of 2012, both S and C corporations have to issue 1099s for all vendors, including other corporations. Previously these were only utilized for services from unincorporated businesses and individuals. Now, 1099s must be issued for products and to other corporations.
For example, if a corporation hires a freelance writer to draft marketing copy for their new website, or they buy all new computer equipment from another corporation, these activities are reported on the 1099-MISC. Unfortunately, the new law adds more work for small businesses and S corporations who are required to keep more detailed records now.
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