Should I expect a 1099

Question

(Note that this is a US specific question)

I am a single person LLC (not C or S corp) and last year I contracted with a staffing firm to perform work for a 3rd party on a 1099 basis (rather than W-2), and did file a W-9 with them. IE I billed the staffing company a flat rate but performed the work directly for the 3rd party, for a total value that well and truly exceed the 1099 threshold.

This week I asked my handler at the staffing company about when the 1099-MISC would be sent out and the reply came back from their a HR today as:

We do not send 1099’s out. Being a corporation you need to keep track of your accounting.

This confused me a bit as other companies I have contracted with in the past on a 1099 basis have issued 1099-MISC forms to me. However in doing a quick scan of the interwebs and reading from Time to Send Out 1099s: What to Know and Instructions for Form 1099-MISC it is possible that they are not required to send me one.

The parts that seem to conflict can be seen in the IRS instructions:

Specific Instructions

2. services performed by someone who is not your employee (including parts and materials), box 7;

Exceptions

Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S Corporation). But see Reportable payments to corporations, later.

Can anyone confirm or disabuse me of my expectation of receiving a 1099?

Answer 1

Whether or not a company issues a 1099 is their choice. If they do not wish to comply with that requirement, that is their business. In 2011 the IRS made filing 1099s more easily tracked. They added a question to the tax forms, "Did you make any payments in 2011 that would require you to file Form(s) 1099?" and there are only "Yes" and "no" answers. So clearly, if the company ticks "yes" but does not file any 1099s that will raise an eyebrow for their company with the IRS. But again, that's their option. Also be aware any payments totaling less than $600 do not require a 1099 be filed.

For you, the 1099 is not mandatory. Yes, receiving 1099s can make your filing a bit easier but you shouldn't really need them. What is required is that you claim your income. You should have records detailed enough to state that Company X paid you $X during the previous tax year, and Company Y paid you $X, and so on. That is all you need for your taxes. To clarify, your taxes are not required to include any 1099s from other companies. The only 1099s you are required to include are those you issued to others due to payouts from your company.

In general, I wait until February 1 before I start tax proceedings for my business. All 1099s must be issues by January 31. So if you don't have a 1099 by the first week of February, you probably aren't going to to get one from that company.

Answer 2

I've been freelancing for over a dozen years, and have received maybe three 1099s in all of that time. I have over two dozen clients, all US-based, of varying size and makeup, most of whom pay me several thousand $$ each year.

As long as you are keeping track of your income and who it's from, you really don't need any 1099s. As was previously answered, it is not required for you to file your taxes, and even if it is required for them (if they pay you more than $600 as a non-employee), their neglect doesn't cause you any problems.

In fact one year I got a 1099 very, very late, after I'd already filed taxes. It was unexpected because that particular client had never sent me one before (and hasn't since). I put the 1099 away and didn't think about it until today, and the IRS has yet to chase me down. I wouldn't stress.

Answer 3

I would definitely report the income so you are covered if you get audited, but don't worry about whether they decide to send you a 1099.

Different companies seem to handle this different ways but in my experience MOST do the 1099. Their tone seems a little irritated, but maybe that's just how accountants talk.

I used to be a sole proprietor and 90% of my clients issues 1099's if I did over $600, but I had at least 1 that never did. I changed to an LLC about a year ago and the same clients kept issuing 1099's. A couple new clients did not but I don't know why. (I was so late with my taxes I didn't have time to ask them...)

I don't know the exact law. I had one client that I actually paid money last year who was an LLC and I asked them and they said it "was a good idea" for me to do the 1099 for them. Other times (like when I had a website built) it never occurred to me to do a 1099 and they never said anything about it.

Answer 4

You contracted as your LLC, not as yourself individually, correct? As an LLC, they are not required to send a 1099 to you, unless it's for one of the "exceptions" you mentioned. The exceptions are quoted from https://www.irs.gov/instructions/i1099msc/ar02.html#d0e92 as follows:

Reportable payments to corporations.

The following payments made to corporations generally must be reported on Form 1099-MISC.

• Medical and health care payments reported in box 6.
• Fish purchases for cash reported in box 7.
• Attorneys' fees reported in box 7.
• Gross proceeds paid to an attorney reported in box 14.
• Substitute payments in lieu of dividends or tax-exempt interest reported in box 8.
• Payments by a federal executive agency for services (vendors) reported in box 7.

The above referenced IRS site also contains Instructions for Form 1099-MISC - Main Contents.

As a business organization, you need to keep your own record of income and expenses, improvements and depreciation. Depending on how you organized your business, you may need to file a corporate return, as well as your personal return.

From https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies:

...an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation.

Either way, a 1099 is not required to be (but could be) sent to you. We've received 2 in the last 23 years (we're a sub-s corporation).