This article discusses one of the most common questions about S corporations’ tax status, “Do S Corps get 1099?”. We will also discuss the IRS 1099 form, its types, who can receive it, and who files it.
IRS has over 800 forms and schedules that US taxpayers and business entities must keep track of to fulfill their tax liabilities annually. Some are tax forms, and some only exist for information exchange.
If you’re too busy to do your own taxes, you have to hire a professional tax advisor to do it for you, costing you additional money. If you decide to DIY it, you’ll have to dedicate hours, if not days, to get everything in order, fill out all the forms, and file them either by mail or electronically.
Whichever route you choose, the US tax filing process costs you money, time, and effort. And when you think you’re done, here comes another form to keep track of – and the cycle continues.
The US, with its citizenship-based and tedious tax system, makes life difficult for US taxpayers – especially those who have had a taste of how other countries operate. Online tax filing, a simplified tax system, and tons of tax exemptions (especially for entrepreneurs) are the norm in many countries.
The only way to eliminate the US taxes (most of them) is to renounce US citizenship. However, even if you want to hold onto your US passport for some reason, you can expect to reduce your taxes drastically by going where you’re treated best.
How do you know where that is? Through Nomad Capitalist’s holistic strategies. Set up a call with us to learn how our exclusive Action Plan can help you legally reduce your taxes.
What is a 1099 Form?
1099 is not a single form. Rather, it’s a series of documents the Internal Revenue Service (IRS) refers to as information returns. Different 1099 forms report different types of non-employee compensation you may receive throughout the year.
The 1099 tax forms document different types of non-employment payments you receive over a year from a person or a business that typically isn’t your employer.
The person or business that makes the payments is responsible for filling out the relevant 1099 form and sending it to you and the IRS.
1099 forms are filed for various payments like rental income, payments for self-employed individuals, independent contractors, or sole proprietors, state tax refunds, etc.
Most 1099 forms are sent by January 31st or February 15th.
Types of 1099 Forms
The following are some 1099 forms you may get in your mail or have to file.
1099-A
You might receive Form 1099-A if your mortgage lender foreclosed on your property and cancelled your mortgage (some or all of it) or has reason to believe that you’ve stopped using the property, sold it, or abandoned it. Cancelled debt is considered taxable income by the IRS, so you may owe some taxes according to the information stated on Form 1099-A.
1099-B
Form 1099-B is used to report income from selling several types of securities and bartering. Brokerages and barter exchanges like websites use it to record the gains and losses of customers during a tax year.
1099-C
You may receive Form 1099 C if your lender cancelled some or all of your debt in connection to the foreclosure of the secured property. The form contains the amount of the cancelled debt. Depending on your situation, you may owe taxes on the cancelled debt, as it’s generally considered taxable income by the IRS.
1099-INT
If you earned over $10 in interest from a bank or other financial institution, you’ll receive a 1099-INT.
1099-CAP
Corporations use Form 1099-CAP to report substantial changes in a company’s control or capital structure. You might receive a copy of the Form 1099-CAP if you own stock in a corporation that underwent a big change in control or capital structure and you received cash, stock, or other property as a result.
1099-MISC
Form 1099–MISC is typically issued to report payments (miscellaneous income) that falls outside the scope of other 1099 forms. Some examples are prize money, awards, attorney payments, etc. You may also need to send a 1099-MISC for substitute payments, attorney fees, etc. A 1099-MISC is never issued for personal services.
1099-DIV
Form 1099-DIV reports the dividends or distributions you received in a tax year. Banks and financial institutions send it.
1099-G
If you receive a tax refund, unemployment (benefits), etc., from the state, local or federal government, you may get Form 1099-G.
1099-K
If you received $600 in payments for goods and services via credit card or any payment settlement entity like PayPal, Venmo, Cash App, etc., you’d be sent a summary of those payments on a 1099-K.
1099-S
Form 1099-S is issued to individuals who’ve made a real estate transaction (like a sale or exchange). Some examples could be acquiring gains from the sale of commercial or residential properties, etc.
1099-NEC
Form 1099-NEC must be filed if a business paid a non-employee $600 or more in the tax year. A non-employee might be a freelancer, independent contractor, self-employed individual, etc.
Do S Corps Receive 1099?
Now that you know the most common 1099 forms and their purposes, let’s discuss whether an individual or a business entity can send a Form 1099 to an S Corporation.
Many people think they must send 1099-MISC or 1099-NEC to an S Corp for services rendered. However, per the IRS’s general rules, you don’t have to send a 1099 form to an S corporation. The same goes for C corporations.
However, if you’re dealing with an LLC, sole proprietorship, or partnership, you should send them 1099-MISC forms whenever appropriate.
So here it is – generally, S corporations don’t receive 1099.
Why Don’t S Corporations Get a 1099?
S Corporations typically don’t receive 1099 forms for payments they receive because of their status as a separate legal entity. The IRS exempts S corporations from receiving the 1099 form because an S corporation is already subject to stringent federal and state tax and reporting requirements.
General Exceptions for 1099 Forms
There are a few payments that require a 1099 form despite having an S corporation status:
- Any gross proceeds paid to an attorney.
- Attorney fees for legal services rendered (even if the lawyer is incorporated).
- Any payments made to for-profit healthcare care providers.
- Any payment made except tax-exempt interest or dividends.
Do S Corps File 1099?
As a business owner, you must know when to issue a 1099 form. If you have an S Corp, you should issue a Form 1099-MISC to each person or business you’ve paid at least $600 during the year in:
- Rents
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Cash payments for fish and other aquatic life you purchased from anyone in the trade or business of catching fish.
- Cash payment from a notional principal contract to an individual, partnership, or estate.
- Attorney payments
- Any fishing boat proceeds.
- At least $10 in royalties or broker payments instead of dividends or tax-exempt interest
Tax-Free Corporate Jurisdictions Are Waiting For You
Do you know what is a better use of your time as a business owner than scouring the internet for the latest US tax information? Actually, managing your business and making money.
However, with the United States’ tedious tax system, and ever-rising tax rates, you can never let taxes take a backseat and focus on more important things like creating generational wealth and expanding your business.
However, what if we tell you that there are countries out there with no corporate income tax or annual reporting requirements? Countries that will offer you lucrative tax exemptions just because you choose their territory to plant a business flag.
Acquiring the right second citizenship or residency can open the doors to several high-yield opportunities for you. Moreover, it can help you eliminate or drastically reduce your taxes.
If you want to go where you’re treated best rather than keep paying the ever-rising US taxes, set up a call with us today.
Do S Corps Get 1099 in 2024: The Ultimate Guide FAQ
Form 1099–MISC is typically issued to report miscellaneous income that falls outside the scope of other 1099 forms. Some examples are prize money, awards, attorney payments, etc.
Form 1099-NEC must be filed if a business paid a non-employee $600 or more in the tax year. A non-employee might be a freelancer, independent contractor, self-employed individual, etc.
An S Corporation or S Corp is named after subsection S of Chapter 1 of the Internal Revenue Code. It’s a pass-through entity that offers limited liability protection to its owners. Moreover, you can deduct pre-tax expenses under an S Corp, reducing your overall tax bill.
As an employee, you must fill out your W-4 form carefully and as accurately as possible. The ability of your employer to correctly withhold federal income taxes primarily depends on it.
