Do I Need a 1099 for an LLC?

By Tom Speranza, J.D.

Do I Need a 1099 for an LLC?

By Tom Speranza, J.D.

The U.S. Internal Revenue Service (IRS) requires businesses to issue a Miscellaneous Income (Form 1099-MISC) return to the people and companies—including limited liability companies (LLCs)—they pay if the arrangement between the business and the service provider meets certain requirements (Instructions for 1099-MISC).

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If you own a small business, you probably pay various contractors and other providers during the year for the essential services that keep your enterprise running. Those expenses can range from the hourly compensation paid to consultants, lawyers, accountants, and other independent contractors to the rent paid to your landlord and the weekly fees paid to the cleaning service that tidies up your office.

1099 Defined

Form 1099 is a type of information return the IRS requires payers to issue as proof that they incurred certain business expenses during the relevant tax year. The person or entity that receives a 1099 uses the form when they file their annual tax return as proof that they received income during that tax year.

Because the form includes both the payor's employer identification number (EIN) and the recipient's EIN or Social Security number, the IRS can match the forms to the two taxpayers as part of its general efforts to enforce the reporting of income and the payment of taxes.

Payments Requiring Issuance of a 1099

A business issues a Form 1099 when it pays more than $600 during a tax year to an LLC for:

  • Rents
  • Services performed by a nonemployee
  • Prizes and awards
  • Other income payments
  • Medical and health care payments
  • Payments to an attorney

Other Types of Business Structures

As a general rule, a business is not required to issue a 1099 to a corporation or other entity taxed as a corporation. Even though an LLC can file an election with the IRS to be taxed like a corporation, your business may not be aware of the LLC's current tax status, so it's usually safer to issue a 1099 to any LLC that you pay more than $600 on an annual basis.

The IRS has a form for businesses to use when they retain the services of an LLC that may trigger a 1099 filing requirement. When your business engages an LLC contractor, send the company a Request for Taxpayer Identification Number and Certification (Form W-9), which requires the LLC to disclose its EIN or the Social Security number of its sole owner and whether it's taxed as a corporation or partnership. The PDF version of the form is fillable, so both you and the contractor can exchange Form W-9 by email and avoid the use of paper forms.

Sending Out Form 1099

Your business must deliver Forms 1099 to its service providers by January 31st of the calendar year following the relevant tax year and then submit them to the IRS by the end of February. So, for example, your Forms 1099 for tax year 2018 must go to your LLC contractors by January 31, 2019, and then to the IRS by February 28, 2019.

If there are errors in any 1099, the contractor should contact you promptly so that you can correct the forms before your business files its annual tax return. Your company's accountant can be a valuable resource if you have questions about whether you need to issue a 1099 for any particular contractor.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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