Business owners often have questions about who should get a Form 1099 from them. If you’re an owner of an S-Corporation, you might have also been wondering if you’ll be receiving any Form 1099s from your clients. In today’s article, I’ll give the rundown on whether or not an S-Corp gets a 1099. I won’t bury the lead on this one (I never really do!): S-Corps do not get a 1099. No matter if your business has made payment to an S-Corporation or C corporation, you most likely (keep reading) do not need to send any type of 1099 to that company. As is the case with any good rule, there
are exceptions. If your business made a payment of at least $600 to one of the following, then you will need to issue a Form 1099 to these businesses, even if they are a corporation:
There is one other small exception that would apply to you if you are an S-Corporation: If you received at least $600 in substitute payments in lieu of dividends or tax-exempt interest, you will receive a Form 1099-MISC for that payment. There are some other very specific exceptions to the rule that do not apply to most. How do I know if I paid an S-Corporation instead of another type of business?When you begin working with a client or business, you should collect a Form W-9 from each of them. On that form, you’ll find the information you need to determine whether you’ll be making payments to a corporation or an independent contractor. Important: Just because you know there is only one person running a business doesn’t mean you can assume that they do not have a corporation. Many S-Corporations are owned and operated by one person. When looking at the W-9, if the single-member limited liability company (LLC) or sole proprietorship box is checked, then you’re working with an independent contractor and need to issue a 1099-NEC to report nonemployee compensation to the IRS. If the partnership box is checked but they haven’t indicated an election for corporation status, then they will need a 1099-NEC as well. If you didn’t collect a W-9 from the business or contractor, there’s no time like the present. If a contractor refuses to fill out a W-9, I wrote a whole post on what to do. Also, if you’re receiving payments from other businesses, don’t be afraid to provide them with a Form W-9. If you are a corporation, you’ll be required to have an employer identification number (EIN) or tax identification number (TIN). Even if you’re not incorporated, I recommend applying for a free EIN so you can use that number rather than your Social Security number when filling out W-9s. So who gets a 1099?You’ll need to send a Form 1099-NEC to any independent contractor (read: anyone who isn’t a corporation) to whom your business paid at least $600 during the year. The “NEC” means nonemployee compensation, and in 2020, this form took the place of completing a Form 1099-MISC for self-employed individuals. An important thing to note is that you only give a Form 1099-NEC for a payment made for services. If you’ve only paid for goods or products, then you won’t need to send one. It’s also important to understand that If you forget to issue a 1099, you may have to pay penalty fees to the IRS. If you paid at least $600 during the year for things like rent, awards, health care, or some other types of payments, you’ll file a Form 1099-MISC for those payments. If you run a business with your spouse, you may also need to give your spouse a 1099. If you have young children, you might need to issue a 1099 to your babysitter or nanny as well. All Form 1099s need to be issued by January 31. What information do I need in order to complete a 1099?To file a Form 1099-NEC or 1099-MISC, you’ll need the following information, which you should ideally collect by having the business or independent contractor fill out a W-9 prior to starting work:
Why didn’t I get a 1099?If you have an S-Corporation, you do not get a 1099. If you are an independent contractor and didn’t receive a Form 1099 from one of your clients, that’s their bad. However, you still must report that income to the IRS so it doesn’t become your problem. Action Items:
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