Do you need a 1099 for LLC? Learn how to issue a 1099 to an LLC, which LLCs require a 1099, and the specific IRS requirements for each type.
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Updated: 2/26/24
If you’re preparing your 1099s for the year, you may be wondering how to issue a 1099 to an LLC for tax purposes. To help guide you, this article will show you which types of limited liability companies (LLCs) should be issued 1099s. We’ll also cover the IRS requirements for each.
The 1099 form is a federal tax document that the Internal Revenue Service (IRS) requires business owners to file yearly. The form is used to report payments made to independent contractors, freelancers, and other non-employees. It contains information such as the payer’s name, address, tax identification number, type of payment, and the amount paid.
As a business owner, you must often provide a 1099 form to any contractor you have paid $600 or more throughout the year. This helps the IRS ensure independent contractors are properly reporting and paying income tax. If you fail to issue this documentation on time, you may be subject to penalties from the IRS.
In most cases, the IRS requires you to report any income paid to a limited liability company on a 1099 form if the amount exceeds $600 in one year, unless the LLC is taxed as a corporation. This income paid includes income from services, rent payments, and other sources. Therefore, if you pay an LLC more than $600 for services, products, or rent (not including rent paid to a real estate agent) within a given tax year, you may be required to send them a 1099.
The type of 1099 used will be determined by what you paid the LLC for. In most cases, it will be either a 1099-MISC or 1099-NEC. A 1099-MISC should be used if you’re reporting payments that aren’t subject to self-employment tax.
When reporting payments that are subject to self-employment tax, you’ll use a 1099-NEC. NEC stands for non-employee compensation, meaning payments made for services from someone who’s not your employee, such as an independent contractor or freelancer.
An LLC filing taxes as single-member LLC is categorized as a “disregarded entity.” This term simply means that the tax return for their business is filed with their individual tax return rather than separately.
That said, you are required to send single-member LLCs a 1099 form. They’ll use this form to report your payments as income when filing their tax return.
By default, LLCs with more than one member are considered partnerships for tax purposes by the IRS. Most models require each partner to file their share of the income on their tax return. This structure means you will need to send them a 1099.
Whether it’s a single-member LLC or a multi-member LLC, LLCs also have the option to file taxes as either an S corporation (please see our What is an S Corp? page) or a What is a C corporation?. Some LLCs will file as an S corporation as a way to save on self-employment taxes, while other LLCs may file as C corporations to take advantage of the wider range of tax deductions available.
In either case, you usually don’t need to issue a 1099 to an LLC filing as a corporation. You can find out whether the LLC is being taxed as a corporation by requesting them to complete a W-9 form.
You must send any 1099 forms that you’re required to send by January 31st of each year. This is applicable regardless of the type of 1099 or business you’re preparing it for.
When issuing a 1099 to an LLC, you must understand how the process works to ensure you’re in compliance with the IRS. You must fill out the correct form with all the required information and send it to the LLC.
There are specific requirements that outline what should be on the form, what type of 1099 you should send, and how you should send them. Understanding these things is essential to avoid penalties from the IRS.
The IRS requirements for a 1099 LLC will vary depending on the type of LLC you’re preparing it for, but each will require your business name and taxpayer identification number (TIN). For example, if you’re preparing the form for a single-member LLC, you’ll need to include the owner’s name, Social Security number, or TIN (if applicable). For partnerships, you will list the business’s name and employer identification number (EIN). Companies with corporation status will not require a 1099, except for special cases.
When filling out the form, you must place information in the correct place on the form.
If you need additional help with the form, you can find complete instructions on the IRS website.
You can get a 1099 form by visiting irs.gov/orderforms. You can order the forms and have them delivered electronically or by mail. From here, you can browse a list of all available forms or search for the type of 1099 form you need.
Each form will have instructions for the payer and recipient. If you need further instructions, consult a qualified accountant.
After completing the form, you must ensure it’s delivered to the LLC. You can determine where the 1099 should be sent by referring to the W-9 form the LLC completed at the beginning of your arrangement.
Each 1099 you must send should be delivered to the LLC by January 31st. Penalties for not providing the form on time can range between $30 and $100, depending on how late it is.
Preparing for the tax season doesn’t have to be stressful, and thankfully, we can help. Whether you’re just starting your LLC, growing your business, or looking to keep your finances more organized, we offer an inclusive set of products to help keep your business on track. More specifically, ZenBusiness Money can help you manage your income, expenses, and taxes all in one place.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
Is 1099 the same as LLC?
A 1099 is the form you send to an LLC to enable them to report the payments you have made to them as income on their tax return. Depending on the type of LLC and the nature of the payments made, the 1099 requirements may not be the same.
Do you 1099 a single-member LLC?
Yes, you do send a 1099 form to a single-member LLC. If the LLC doesn’t have a TIN, you should list the owner’s Social Security number.
Is it better to have an LLC or 1099?
A 1099 is not a business structure. Instead, a 1099 is the document an LLC or other business or individual will receive that reports payments they have received for products or services.
What happens if I fail to issue a 1099?
Failing to issue a 1099 form when required can lead to penalties from the IRS. The amount of the penalty depends on how late the 1099 is filed, ranging from $60 to $310 per form. If the IRS determines that the failure was intentional, the penalty increases to $630 per form, with no maximum limit. Beyond penalties, failing to issue a 1099 can result in an audit or investigation by the IRS, potentially leading to additional fines and complications.
What is the difference between a 1099-NEC and a 1099-MISC?
The key difference between the 1099-NEC and the 1099-MISC forms lies in the type of payments they report. The 1099-NEC (Nonemployee Compensation) form is used specifically for reporting payments of $600 or more to non-employees, such as independent contractors, freelancers, and other service providers. This form was reintroduced in the tax year 2020 to separate nonemployee compensation from other types of payments.
The 1099-MISC (Miscellaneous Income) form, on the other hand, is used for various other types of payments, including rent, prizes and awards, medical and healthcare payments, and other income payments not covered by the 1099-NEC. Essentially, the 1099-MISC covers miscellaneous income that does not fit the specific criteria for nonemployee compensation.
When do LLCs need to send out 1099s?
LLCs are required to send out 1099 forms by January 31st following the tax year in which payments were made. This deadline applies to both furnishing the copy to the recipient and filing with the IRS. For example, for payments made during the 2023 tax year, 1099s must be sent out by January 31, 2024. This ensures that recipients have the necessary information to file their own tax returns, and it allows the IRS to cross-reference reported income. It’s crucial for LLCs to adhere to this deadline to avoid penalties for late filing.
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