Understanding 1099 Forms and Requirements
Owner Distributions and 1099 Reporting
Yes, owner distributions do get 1099. The 1099 is used to report distributions from an LLC to the IRS. As a 100% owner of an S-Corp who distributed cash to himself in 2019, you don’t need to create a 1099. Your S-Corp doesn’t need to issue Form 1099-DIVs when shareholders take distributions—they should be reported on each shareholder’s K-1.
LLCs, S-Corps, and Tax Forms
For a multi-member LLC with S Corp status, each owner should receive a K1 at the end of the year. The company does not need to report a 1096 for the contractors. Form 1099-DIV is sent by financial institutions to investors who receive dividends and distributions from investments during a calendar year. However, if cumulative dividends are not greater than $10, no 1099-DIV form is sent.
Form 1099-R and Early Distributions
The IRS mandates distributions of $600 or more must be reported on Form 1099-DIV. For more information on filing Form 1099-R and other plan sponsor deadlines, visit our Knowledge Center here. Code 1: Early distribution, no known exception. This distribution is subject to the 10% penalty.
When to Issue a 1099
You must issue a 1099 when you pay a vendor more than $600 for the year. A business owner generally must file Form 1099-MISC when they pay an unincorporated independent contractor at least $600 in a year for work performed in the course of the business. The “general rule” is that business owners must issue a Form 1099-NEC to each person to whom they have paid at least $600 in rents, services (including parts and materials), prizes and awards, or other income payments.
The magic number here is $600. A payer must issue a 1099-NEC when it pays $600 or more per year for services to anyone who isn’t an employee.
Reporting for Different Business Structures
If an LLC pays an individual or a partnership $600 or more for services rendered, a 1099-MISC form must be prepared and provided to the recipient. Multi-member LLCs are taxed as partnerships and hence must file 1099-MISC forms. However, if an LLC is taxed as an S corporation, it will not receive a form 1099.
Single-Member LLCs
Single-member LLCs that have not elected to be treated as a corporation for tax purposes generally do not receive 1099 forms. Instead, the income and expenses of the LLC are reported on the owner’s personal tax return using Schedule C (Form 1040).
Independent Contractor and LLC Ownership
You can 1099 yourself from the LLC as often as you work for the LLC. LLCs should submit Form W-9 to customers and clients to facilitate the receipt of a 1099. You will only receive a 1099 if you provided services above $600.
Hiring Legal Help
If you need help with issuing or receiving a 1099, you can post your legal need on UpCounsel’s marketplace.
Specific Conditions for 1099 Forms
When a single-member LLC is taxed as a Sole Proprietorship or a multi-member LLC is taxed as a Partnership, any business that pays the LLC $600 or more for services in the year must send it a 1099-NEC form.
If an LLC is taxed as an S Corporation or a C Corporation, no 1099 is necessary under most circumstances.