Do Partnerships Get a 1099 Form?

A partnership occurs when two or more people work together, contributes money, property, labor, or skill. They also share profits and losses.

As per IRS rules for 1099 forms for partnerships, they do not have to pay federal income tax. However, partnerships are still required to file an information return Form 1065. They also don’t have to formally register the business to be considered a partnership.

Do I Need to Send 1099 Forms to a Partnership?

The IRS generally requires you to send a 1099 form to a partnership if you paid them $600 or more during the year for services other reportable payments as per IRS rules for 1099 to partnerships.

Even though partnerships don’t pay taxes directly, filing a 1099 form helps the IRS track payments and ensures that the partners report their shares.

What Type of Payments Trigger a 1099 Filing for Partnerships?

Payments of $600 or more to partnerships usually triggers 1099 form reporting. You may be required to report those payments to the IRS using Form 1099-NEC or 1099-MISC, depending on the nature of the payment.

Service Fees

Anytime an organization contracts a partnership to provide a service and the payment meted out for the service is above the $600 reporting threshold, it should be reported on Box 1 of 1099-NEC.

Rent & Royalties

Rental payments of $600 or more made to partnerships for office space, land, or equipment are reported on Form 1099-MISC. Royalties of $10 or more made to partnerships are also reported on 1099-MISC.

Prizes & Awards

If a partnership wins a prize or an award, and the amount meets the minimum reporting threshold of $600, it must be reported on Box 3 of 1099-MISC.

Backup Withholding

If a partnership cannot provide the correct EIN or even fails to provide one, you must withhold 24% backup withholding and report the amount withheld in Box 4 of 1099-MISC or 1099-NEC form.

1099-NEC vs 1099-MISC For Partnerships: Picking the Right 1099 Form

Understanding 1099-NEC vs 1099-MISC for partnerships is key to reporting the correct type of payment.

1099-NEC

1099-NEC reports nonemployee compensation that is $600 or more. When it comes to partnerships, services rendered by partnerships, such as consulting, legal, accounting, or other professional services, are reportable in Box 1 of 1099-NEC.

1099-MISC

If your business pays a partnership rent, royalties, prizes, or other miscellaneous income, use Form 1099-MISC, reporting amounts in the appropriate box (e.g., Box 1 for rent, Box 2 for royalties).

Payment Type	Form (With Boxes)
Consultant fees	1099-NEC Box 1
Paying office rent to a partnership (min threshold=$600)	1099-MISC Box 1
Paying $10 or more in royalties to a partnership	1099-MISC Box 2
Legal settlements	1099-MISC Box 3

Step-by-Step 1099 Filing Guide For Partnerships

Step 1: Collect and Verify Partnership Details

Always verify the partnership’s information (legal name & EIN) by collecting and validating the W-9.

Step 2: Track Payments Made to Partnerships

Log every payment date and amount paid to the partnership. Separate the payments made for service, rent, vs. other types of payments. Once the payment is segregated, file the correct tax form. For example, report payments for services rendered by partnerships on 1099-NEC.

Step 3: Complete the correct 1099 Form

Enter the aggregated payment amounts in the correct boxes. Double-check TIN and name with IRS records using our real-time TIN matching tool to prevent backup withholding.

Step 4: Distribute & Submit to the IRS

Provide ‘Copy B’ to the partnership by Jan 31. File ‘Copy A’ of the correct 1099 form with the IRS by Mar 31 for e-filing (Feb 28 for paper filing).

How to fix 1099 filing errors

If the 1099 form your business submitted has errors, you can fix it by filing a “CORRECTED” 1099 form.
File a new 1099-MISC or 1099-NEC form with updated information. Check the “CORRECTED” box on the form. Resubmit it to the IRS and sent the recipient copies to the partnerships.

Backup Withholding & Exemptions For Partnerships

If you fail to verify the TIN and name combination with IRS records, it can lead to a mandatory 24% withholding on payments, even for partnerships. The reporting withheld amount is then reported on Box 4 on both forms, 1099-MISC and 1099-NEC.

Common 1099 Mistakes For Partnerships

The IRS rules for 1099 to partnerships may sound straightforward, but even a simple reporting can be riddled with mistakes.

• Misreporting payments for services on 1099-MISC instead of 1099-NEC is a common mistake. Payments for services rendered are always reported on 1099-NEC Box 1 as of 2020.
• Not aggregating all the payments made to partnerships is another common mistake. The IRS requires all payments to a partnership be combined across all accounts and payment types.
• Anytime a TIN is invalid or not provided, a 24% backup withholding must be triggered, no matter the payment amount. If you skip backup withholding, you and your business will be held liable for the amount of tax that should have been withheld.

Issuing 1099s for Partnerships Made Simple: Tips for Smooth Filing

E-file 1099s with Tax1099

Using authorized e-filing services like Tax1099 reduces filing errors and makes 1099 filing faster and more accurate.

Keep digital copies of W-9

Collecting W-9 from a partnership at onboarding and storing the documentation for at least 4 years is a tax form filing best practice that should always be followed.

Schedule quarterly reviews

Every quarter, schedule a review of vendor and payment records. This review ensures that all the information required for 1099-NEC and 1099-MISC filing is accurate and up-to date.

Watch IRS deadline alerts

Don’t wait until year-end. Always file your 1099s before the e-filing deadline. Failing to file means that you have to pay penalties of up to $330 per form or even up to $660 per form for intentional disregard.

Real-Life Scenarios

Reporting Partnership Payments

Scenario 1:

If a small business paid a design partnership $1,200 for their consulting work, the business needs to file 1099-NEC since consultation is considered a service, and the payment amount is above the $600 reporting threshold.

Scenario 2:

If your company pays $800 monthly rent to a real-estate joint venture that’s classified as a partnership, you need to file Form 1099-MISC and report the amount in Box 1 for rental payments.

Scenario 3:

If a film production partnership won a short film contest and was awarded $1,500, the organization hosting the contest must file a 1099-MISC Box 3, and send a copy of the form to the partnership.

Scenario 4:

If a tech partnership receives dividend payments during the year, no 1099 form needs to be filed. This is because, as per the IRS, dividends received by a partnership are only reported on the partnership’s Schedule K-1.

Scenario 5:

If your company paid a marketing LLC using Stripe, you do not need to file any 1099s for the LLC. Instead, it is Stripe who needs to issue a 1099-K form for the LLC.

Scenario 6:

If a partnership sends your business a W-9 form without any EIN, you withhold 24% of the payment as backup withholding and report the withheld amount on Form 1099-NEC, Box 4.

Conclusion

Partnership payments do come with 1099 obligations. So, if your business paid for services, office rent, or other reportable payments, the IRS expects you to file and report those payments either on a 1099-MISC or 1099-NEC form.

Tax1099 is here to help you file the right forms. Our platform is authorized by the IRS to help you e-file 1099-MISC and 1099-NEC.

Our automated system handles form completion and instant error checks, along with real-time TIN verification and USPS Address Validation.

You can also easily request, collect, and manage your vendors’ details through our W-9 or W-8 form digital solicitation tool. As well as securely deliver recipient copies via our password-protected portal, with access to current and prior-year forms.

FAQs

Do I always send a 1099 to a partnership?

Generally, you only send 1099s to partnerships if you paid $600+ (or $10+ royalties) or met the reporting requirements as per IRS rules. Payments below these thresholds or processed via third-party networks do not require you to issue a 1099 to the partnership.

Which 1099 for freelance work by a partnership?

For reporting payments to freelance work by a partnership, you can use Form 1099-NEC and report the amount in Box 1(only if the payment for services is $600 or more in a year).

Can I combine rent and service fees on one form?

No, you cannot combine rent and service fees in one form. For rental payments to partnerships, use 1099-MISC, and for service payments, use Form 1099-NEC.

What if the partnership won’t return a W-9?

You must withhold 24% backup withholding if a partnership fails to provide a correct W-9. The withheld amount should then be reported on either 1099-MISC or 1099-NEC.

How do I correct a mistake on a filed 1099?

If a mistake was made on a filed 1099, you can issue a “CORRECTED” form with the updated details and send it again to the both the IRS and the recipient.

Are LLCs always treated as partnerships?

LLCs are treated only as partnerships if they have chosen to select partnership status on their tax returns.

Do I need to file paper or can I e-file?

As of 2023, e-filing is now mandatory if you file for more than 10+ information returns.

From rent and royalties to service fees, if a partnership got paid, it’s time to send them a 1099 form.

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