If you’ve ever worked as (or paid for the services of) an independent contractor (IC), you’re likely familiar with 1099s. These documents are relatively simple and used to record gross payments made to an IC. However, mixing up your business structure by filing an S corporation can blur the lines about when you need and don’t need to use a 1099.
On that note, does an S corp get a 1099? The answer depends on the business dealings you conduct during the tax year and a variety of other factors, which will be discussed below.
What is a 1099 Form?
A 1099 is an IRS form used to report various types of income other than wages, salaries, and tips. Businesses typically use these forms to report payments made to contractors or freelancers. The most common types of 1099 forms include:
- 1099-NEC: Reports payments to independent contractors and non-employees.
- 1099-MISC: Captures miscellaneous income, such as rent.
- 1099-K: Reports payments via card and third-party network transactions.
Understanding the three primary kinds of 1099s is one thing, but the question still stands: Do S corps receive a 1099 each tax season?
Do S Corps receive 1099s?
The short answer here is no, or at least not generally. According to IRS guidelines, businesses are not required to issue 1099-NEC or 1099-MISC forms to corporations for services rendered. The rule applies to any payments you receive for goods or services.
However, there are exceptions, particularly in specific industries or when handling certain types of payments. For instance, if your S corp provides legal services, you may still receive a 1099-MISC, regardless of your corporate structure.
Why S Corporations don’t typically receive 1099s
The primary reason that S corps don’t usually receive 1099 forms is that the IRS views corporations differently from individuals or sole proprietors. It assumes that corporations are capable of reporting their income accurately without the need for an additional form.
That distinction can help streamline corporate reporting, but it also causes you to shoulder significant responsibility. While you may not receive a 1099 for many types of payments, you will still need to report all business income to the IRS.
When do S Corps receive 1099s?
Certain types of payments and services may still require a 1099 form, even if your S corp renders those services. In most cases, these payments will be filed using a 1099-MISC, which is a bit of a catch-all form.
If you provide legal services, you may still receive a 1099-MISC for payments over $600, even if you’re structured as an S corporation. Payments made to S corporations providing medical or health services often require a 1099-MISC as well.
More about 1099-K forms for S Corporations
A 1099-K represents one of the most common exceptions to the “no 1099 for S corporations” rule. If your S corp engages in high-volume online sales (200 or more transactions in a calendar year) or receives payments exceeding $20,000 via a third-party payment processor like a credit card network or PayPal, it may receive one of these forms.
These documents report the following:
- Credit card payments
- Online payment platforms (e.g., PayPal)
- Other third-party payment processors
These entities are legally obligated to send you a 1099-K if you meet the reporting thresholds mentioned earlier. While your individual transactions may not require a 1099-MISC or 1099-NEC, your cumulative transactions via a single payment entity can trigger the creation of a 1099-K. As such, it’s best to confirm with any platform you use to see if they issued (or will issue) a 1099-K.
Reporting income without a 1099
Whether you receive a 1099 form of any kind or not, it is still your responsibility to accurately report all business income on your tax returns.
Here’s how that process works:
Track all payments
You need to keep detailed records of all income you receive. Proper bookkeeping ensures that you report your income accurately. Failing to report everything can trigger an audit or even leave you facing a huge tax bill.
File the correct forms
Make sure to file your income on Form 1120-S, the tax return document specifically intended for S corps. You’ll also need to report any shareholder distribution on Schedule K-1. Again, failing to do so can result in an audit and severe penalties from the IRS.
Work with a tax pro
Given the complexities of tax reporting, it’s a good idea to consult with a tax professional whose work focuses on S corporations to ensure everything is handled properly. A skilled professional will fill out your forms correctly, help you meet important deadlines, and minimize the risk of an audit.
Best practices for issuing 1099s as an S Corp
While S corps do not often receive 1099s, they may still need to issue them. If your S corp hires freelancers or ICs, you are required to issue a 1099-NEC for service payments over $600.
With that in mind, you must make sure you understand who counts as an IC and who doesn’t. You’ll have to follow different procedures when paying these workers, and misclassifying them can open you up to a whole new set of tax and liability challenges.
Once again, it is likely best for you to speak to a professional who is adept in S-corp filing and accounting processes. They can help with things like determining a reasonable salary for yourself, meeting filing deadlines, and creating your Articles of Incorporation.
We also suggest using accounting software that can automatically track all payments and generate 1099 forms for you. By doing so, you can ensure that every eligible IC receives their 1099s in a timely manner come tax season.
Does your S Corp need to file a 1099?
Here’s a quick list of questions that can help you determine whether your S corp needs to file a 1099:
- Did you pay an independent contractor $600 or more for services?
- Did you pay for services using cash, check, or direct deposit?
- Did the contractor provide you with a completed Form W-9?
If you answered “yes” to these questions, you must file a 1099-NEC for those contractors. If you are uncertain, consider joining a program that assists with S corp filing processes.
Navigating 1099s and other filing forms made easy with Besolo Solo S Corp
Keeping up with all of the forms your S corp has to file can be a nightmare, especially if you are doing things manually. Besolo’s Solo S Corp is meant to simplify the filing process and help you stay on the right side of IRS regulations. And once you navigate all of the challenges associated with 1099s for S corps, you can take full advantage of the tax benefits that these unique business structures provide.
