A Form 1099 is an official tax form that shows when income has been paid to someone who is not an employee. It’s used by the IRS to check that everyone is properly reporting any money they’ve received and is paying taxes on it. If you own or run a Limited Liability Company (LLC), then it’s very likely you’ll receive 1099 forms that you need to include in your tax return, and you might even need to send out some 1099 forms yourself.
Sometimes, it can be complicated to figure out who gets a 1099 form at tax time. Do you need to send a 1099 to everyone your LLC does business with? How do you get the information to file a 1099? Do all LLCs get and send 1099 forms? Do partnerships get 1099 forms? What do you do with a 1099 if your LLC receives one?
We’ve answered all of your questions in our guide to sending and receiving Form 1099s for your LLC.
The 1099-NEC Form
A 1099 form covers many different types of income. You have the 1099-INT form for interest you’ve received, the 1099-DIV for share dividends and a general 1099-MISC form for miscellaneous income. For most LLCs, though, the 1099 from you’re interested in is a Form 1099-NEC. The “NEC” stands for “Non-Employee Compensation.”
It’s the 1099-NEC that we’ll be discussing in the rest of this guide. If you need to know about other types of 1099 forms, it’s best to chat with your accountant. It’s also helpful to know this type of income used to be reported on a 1099-MISC, but the IRS changed that to a 1099-NEC for tax year 2020 and beyond.
What Does a 1099-NEC Form Do?
A 1099-NEC form reports income to the IRS. The IRS checks that the amounts included on a 1099-NEC are also reported on a tax return, so the income is taxed correctly. A 1099-NEC helps to stop taxpayers from not reporting or underreporting their income.
When Do LLCs Issue 1099-NEC Forms?
Generally, your LLC will need to create and send out a 1099-NEC if all of the following are true:
- You are paying someone who is not an employee. This includes freelancers, contractors, vendors, other small businesses (like accountants or agencies) or someone else who provides services.
- You are paying them $600 or more in total over the course of a calendar year.
- You are paying them as a form of compensation, normally for services they have provided to you. This can also include referral fees, commissions, professional fees, benefits and similar.
- You paid them from your business, whether that’s directly from your business account or as an expense that you then claimed back from your business.
You do not normally need to file a 1099-NEC form if you’re paying for goods or merchandise from another business. You do not need to file a Form 1099-NEC for wages paid to your employees.
Do Sole Proprietors and Partnerships Get a 1099-NEC?
Yes. You’ll always issue a 1099-NEC to businesses of the following types:
- Sole proprietors
Do S Corporations and C Corporations Get 1099-NEC Forms?
No. You do not normally need to issue 1099-NECs to businesses that are registered as S Corporations or C Corporations. Note that there are a few specific types of payment that you might need to report (like medical or substitute payments), so do talk to your accountant.
Do LLCs Get 1099-NEC Forms?
There is no simple answer to the question of “Do LLCs get 1099 forms?” Not all LLCs are set up for the same tax treatment. Whether or not you have to file a 1099 for your LLC contractors depends on how their LLCs file their taxes.
If your contractor files taxes as a single-member LLC, they are considered a “disregarded entity” (with all the income simply passing through to the LLC owner’s individual tax return), and in this case, the LLC can be considered a “person” for tax purposes and you should file a 1099-NEC for them.
If your contractor is an LLC that files taxes as a corporation (S Corporation or C Corporation), they are treated as a corporation for tax purposes and this means that they generally do not have to receive a 1099-NEC. Note that there are a few specific types of payment that you might need to report (like medical or substitute payments), so do talk to your accountant.
When Does My LLC Need to File a 1099-NEC By?
You need to create and file a 1099-NEC by January 31 each year for the previous tax year.
What Information Does My LLC Need to File a 1099-NEC?
You’ll need several pieces of information to complete and file a 1099-NEC.
For the person you’re issuing the form to, you’ll need: their name, address, Taxpayer Identification Number (TIN) (normally their Social Security number or their Employer Identification Number), the type of business they are and some other information. You can get all of this information by asking them to fill in a Form W9: Request for Taxpayer Identification Number and Certification.
When you’re completing a Form 1099-NEC, you will also need to include your business name, address, TIN and the total amount you’ve paid. You will also need to include if you’ve withheld any income tax.
Once you have this information, you can download a blank Form 1099-NEC, complete it and file it. Alternatively, there are several online services that will generate and file 1099-NEC forms on your behalf.
Who Does My LLC Send a 1099-NEC To?
You’ll file a 1099-NEC directly with the IRS. You will also send a copy of the form to the business that you’re filing it for. Several online services will allow you to electronically send and file 1099-NEC forms.
Will My LLC Receive 1099-NEC Forms?
Yes, it’s very likely you will receive 1099-NEC forms if you perform services and receive compensation from clients.
How Do I Process 1099-NEC Forms That My LLC Has Received?
When you complete your tax return, include the amounts listed on the 1099-NEC and the business that paid it to you. If you’re filing through tax return software, there will be a space to record this income. If your tax return is prepared by an accountant, they will enter the details for you.
Figuring out who gets a 1099-NEC at tax time doesn’t have to be overly complicated. With some advance planning, you can make sure to take care of your tax reporting requirements for your 1099 vendors and help everyone save time and avoid extra stress during tax season.