Do S-Corps Get 1099s? Receiving and Issuing Rules

S-corporations, often called S-Corps, are a popular business structure that allows profits and losses to be passed directly to the owners’ personal income without being subject to corporate tax rates. This pass-through taxation means the business itself avoids double taxation, where income is taxed at both the corporate level and again when distributed to shareholders. An S-Corp maintains the limited liability protections of a corporation while offering the tax benefits typically associated with partnerships.

Form 1099 is an information return used by the Internal Revenue Service (IRS) to report various types of income paid by a business or individual that are not wages, salaries, or tips. S-Corps can interact with 1099 forms in two primary ways: they can either receive them as a recipient of certain income or be required to issue them as a payer of specific types of income.

S-Corp as a Recipient of 1099s

S-Corps may receive Form 1099 in certain situations, particularly when the payer is not a corporation. Generally, businesses are not required to issue 1099-NEC or 1099-MISC forms to corporations for services rendered. This exemption typically applies to payments made by one corporation to another.

However, an S-Corp might receive a Form 1099 from individuals, partnerships, or certain trusts and estates if payments exceed reporting thresholds. For instance, if an S-Corp provides services to a non-corporate entity, such as an individual or a partnership, and receives $600 or more for those services, the payer may issue a Form 1099-NEC.

An S-Corp may also receive other types of 1099 forms. For example, if an S-Corp owns rental property and receives $600 or more in rental income, the payer would issue a Form 1099-MISC. Royalty payments of $10 or more received by an S-Corp would be reported on a Form 1099-MISC. Other examples include prize winnings or certain legal settlements.

When an S-Corp receives a 1099 form, the reported income is incorporated into the S-Corp’s financial records. This income flows through to the S-Corp’s tax return, Form 1120-S, and subsequently to the shareholders’ Schedule K-1s. The shareholders then report their share of the income on their personal tax returns.

S-Corp as a Payer of 1099s

An S-Corp has obligations to issue Form 1099 when it acts as a payer of certain types of income in the course of its trade or business. The primary obligation involves reporting payments to independent contractors or other non-employees for services. If an S-Corp pays $600 or more to a non-employee for services in a calendar year, it must issue Form 1099-NEC (Nonemployee Compensation) to that individual or entity. This threshold applies to payments made to individuals, partnerships, or LLCs taxed as sole proprietorships or partnerships.

Payments to corporations, including other S-Corps and C-Corps, are generally exempt from 1099 reporting requirements. However, there are significant exceptions. For example, payments for legal services totaling $600 or more must be reported on Form 1099-NEC, regardless of whether the payee is an individual or a corporation. Medical and healthcare payments of $600 or more made to providers, including corporate entities, are required to be reported on Form 1099-MISC, Box 6.

Form 1099-MISC is used for other payments not classified as non-employee compensation. This includes rent payments of $600 or more, royalty payments of $10 or more, and prizes and awards totaling $600 or more. Payments for merchandise, telephone calls, freight, storage, and similar items generally do not require a 1099. Wages paid to employees, which are subject to income tax withholding and FICA taxes, are reported on Form W-2, not Form 1099.

Preparing and Submitting 1099 Forms

An S-Corp must gather accurate payee information throughout the year for 1099 compliance. A crucial step involves obtaining a completed IRS Form W-9 (Request for Taxpayer Identification Number and Certification) from each vendor or independent contractor before payments. This form provides the payee’s legal name, address, and Taxpayer Identification Number (TIN), which can be a Social Security Number (SSN) or an Employer Identification Number (EIN). The W-9 also certifies if the payee is subject to backup withholding, requiring the payer to withhold a percentage of payments for the IRS.

Once the necessary information is collected, the S-Corp can prepare the 1099 forms. This can be done using accounting software, directly through IRS forms, or by utilizing online filing services. As of 2024, businesses filing 10 or more information returns must file electronically using the IRS’s Filing Information Returns Electronically (FIRE) system. A Transmitter Control Code (TCC) must be obtained from the IRS to use the FIRE system.

There are specific deadlines for filing 1099 forms. For Form 1099-NEC, both the recipient copy and the IRS copy must be furnished by January 31 of the year following the payment. For most other Form 1099-MISC payments, recipient copies are due by January 31. However, the IRS filing deadline for Form 1099-MISC is February 28 if filing on paper, or March 31 if filing electronically.

If any deadline falls on a weekend or holiday, it shifts to the next business day. Penalties can apply for late or incorrect filings, ranging from $60 to $330 per form, with higher penalties for intentional disregard.