Automate your Accounts Payables and Vendor Management with Zenwork Payments Start 30-Day Free Trial

Table of Contents

1099-MISC is a tax form that reports the income such as prizes, rents, and royalties to LLC in the tax return form. As a business, you might be in dilemma about whether you need to fill 1099-MISC form.

What are the rules of exemption for 1099-MISC filing? How to file 1099 for LLC? Do LLC corporations get 1099? Confused about LLC S Corp 1099-MISC rules?

Since all LLCs are not taxed the same, you need to know the rules regarding 1099-MISC form. In this post, we've talked about the Form 1099-MISC for LLC taxed as corporation. We'll also discuss the steps to fill out 1099form for LLC.

Why LLC Classification Changes 1099-MISC Duties?

Different LLC classifications have different rules for 1099-MISC form filing. From the IRS viewpoint, LLCs can be classified as S-Corp, C-Corp, partnership or sole proprietorship. A W-9 is used to verify the classification of LLC.

An LLC has an option to either check C corporation or S corporation or partnership/disregarded entity. Based on this selection, the 1099-MISC reporting changes.

In some cases, payments to LLC require Form 1099-MISC reporting. These include:

Penalties for Missed, Late, or Incorrect 1099-MISC

A penalty will be charged if you fail to issue Form 1099-MISC to the payee within the deadline. The penalty amount depends on when you file the correct information return or furnish the correct payee statement.

How is the Tax Information Collected for an LLC?

The most appropriate way to find the LLC tax status is by requesting a complete W-9 form. Line 3a of W-9 form indicates how entity is classified for tax purposes. If the federal tax classifications mention LLC, look for further tax classification in line 3b.

IRS uses this document to determine whether payments to LLC require 1099-MISC or not. Thus, the payee should fill in the W-9 form correctly.

Compliance tip: Businesses must keep records of W-9 forms, tax returns and 1099-MISC forms for at least three to four years for audit purposes.

Payments to LLC Corps That Require Form 1099-MISC

Certain payments made to LLCs still require the issuance of Form 1099-MISC, despite the corporate exemption. The table below shows which payment type demands 1099-MISC for LLC taxed as corporation and under what conditions.

Payment Type 1099-MISC Box Threshold (2025 TY) Who Files It? Comments
Medical & health care payments Box 6 Equal to or more than $600+ Payer of medical or health care services Reportable even to corporations/PCs. List the corporation as recipient.
Gross proceeds paid to an attorney (legal settlements) Box 10 Equal to or more than $600+ The payer who disburses settlement or similar proceeds to attorney Not for the attorney’s fees for services (those are 1099-NEC Box 1).
Substitute payments in lieu of dividends or tax-exempt interest Box 8 Equal to or more than $10+ Broker or custodian who credited customer Applies to LLC customers taxed as corporations; normal vendors won’t use Box 8.
Cash payments for fish (or other aquatic life) for resale Box 11 Equal to or more than $600+ Buyer of fish from catchers Reportable even when seller is a corporation.
Any payment subject to backup withholding 1099-MISC (appropriate box) + Box 4 for tax withheld Any amount (if backup withheld) The payer who withheld If you backup withheld, you must file regardless of corporate status.

How to Issue 1099 to LLC? (Step-by-Step Checklist)

Now that you know which LLC corporations require 1099-MISC filing, let us look at how to fill that. Here is a step-by-step guide to do that:

Collect & Verify W9s

The first step is to gather W-9 form from the LLCs that you have made payments to. The W9 form has a taxpayer identification number (TIN) and tax classification column.

Once you've gathered the forms, run a TIN match against IRS database with Tax1099. This ensures that you fill in the accurate TINs that matches with tax classification records.

Identify Exceptions

Next, identify the list of 1099-MISC exceptions for corporations. S-corp or C-corps are exempted from most payments except for medical and legal services.

For the LLCs classified as sole proprietorship or partnership, most payment requires 1099-MISC reporting. Some exceptions are payments made for merchandise, telegrams, telephone, storage, and similar items.

Aggregate Payments to EIN

Now, you've identified the payment recipients, sort these payments by EIN or SSN. Aggregate the payments for similar EIN and track the total payments to confirm thresholds.

Most payments over $600 require reporting for LLCs as sole proprietorship or partnership. However, the total payments include only reportable items and not payments like reimbursed expenses and product purchases.

Fill out the taxation form

Now you have reported the payments, it is time to fill in your tax forms. The deadline for filling 1099-MISC is March 31st, if filing online and February 28th if filing through paper.

Here are the few eFiling tips to look for:

Distribute & File

Lastly, you need to distribute copies to recipients by January 31. If you're filing electronically, use an e-filing platform like Tax1099. If you're filing on paper, you must include Form 1096. It is a summary form that transmits the 1099 information to the IRS.

Common Compliance Pitfalls to Avoid While Tax Filing

Incorrect filing of your tax returns might levy heavy penalties or an inaccurate refund. Here are the common compliance pitfalls to avoid while filing tax returns.

Misreading W9

You might mistakenly consider LLC as a sole proprietorship while reading W9 box. This could lead to misclassification, unnecessary filings and heavy penalties.

Missing Attorney Exceptions

You might also overlook the special exception for law firms while filling out Form 1099-MISC. If you have made payments to a law firm classified as a C Corporation, you must check Box 10.

Any payments over $600 may require 1099-MISC filing even if it is an LLC classified as S- or C-corp.

Reporting Medical Payments on 1099-NEC

Business might make the mistake of placing medical payments on Form 1099-NEC instead of the 1099-MISC.

Medical payments, including payments to doctors or health facilities, should always be reported on 1099-MISC.

Ignoring Backup Withholding Rules

If a payee’s TIN is invalid or missing, you are still required to withhold taxes. Many LLC corporations overlook this backup withholding requirements and may fall in penalties.

Late Filing

Late eFiling can result in penalties up to $660 per form. It not only incurs penalties but also damages your business’s reputation with the IRS.

Platforms like Tax1099 helps you stay compliant by sending deadline reminders, gives option to schedule filing in advance, and automate the entire filing process.

Frequently Asked Questions:

No, an LLC taxed as an S-Corp does not receive a 1099-MISC for its services. Payments to S-Corp LLCs are usually not subject to 1099-MISC reporting unless for payments like medical and attorney services.

If your LLC changes from a sole proprietorship to an S-Corp midyear, you need to issue 1099s based on the LLC's classification for the period in question. Payments made before the S-Corp election should be treated as sole proprietorship payments, and post-election payments as S-Corp payments.

Generally, no. Attorney fees of $600 or more paid in business should be reported to box 1 of 1099-NEC. However, settlement gross proceeds of $600 or more paid to an attorney in connection with legal services must be reported on Form 1099-MISC box 10.

No, purchases of medical devices do not count as "medical payments" for 1099 reporting. "Medical payments" refer specifically to payments made to healthcare providers for services rendered, no. t to equipment or device purchases.

If the corporation's TIN fails IRS matching, LLCs must make corrections within the 96 hours of submission date. If the LLC fails to do so, they may be levied with §§6721 and 6722 penalties.

Yes, gross proceeds paid to an attorney that are $600 or more in a year must be reported on Form 1099-MISC Box 10. This threshold applies regardless of the attorney's business structure.

Payments over $600 made to LLC corporations for medical or legal purpose need to be reported on Form 109-MISC. There are no other exceptions.

Conclusion

To wrap up, we'd suggest you verify the LLC's tax classifications carefully. After confirming the classification, apply the corporate exceptions correctly laid in the instructions.

If you need assistance filling out the form, use e-filing service like Zenwork to stay audit-free.