no 1099 for you!
February 6, 2011 4:11 PM   Subscribe

1099 form issuance refused. what to do?

Last year I had a variety of income sources including several ad-hoc clients who are not accustomed to issuing 1099s. I sent them all reminders with the totals they had paid and links to the IRS info regarding the federal requirement that a 1099 be issued to me by January 31. One of the clients, my most important, flat-out refused. In general, this client files extensions until around August and in August they might get around to filling out a 1099.

I have their EIN and could easily fill out the form myself. I also file online and thus there is no requirement to send a physical copy of the form in with my return.

There is a line-item for non-1099 income, which appears to be a reporting trigger for the non-1099 company. In other words, my client is daring me to report them to the IRS for non-compliance.

Finally, this year I have set up an S-Corp and an LLC with the intent that my consulting work is paid to the LLC and my other income (retail sales and the like) is paid to the S-Corp (last year I was a sole proprietor, duly licensed and permitted). I would like to defuse the untenable dependence on 1099 reporting from uncooperative clients. I know that funds paid to an S-Corp don't have to be 1099 reported at all. Is this also true for the LLC?
posted by mwhybark to Work & Money (8 answers total) 2 users marked this as a favorite
on reread, this is confusing. there are two things I'm looking for input on:

1. what should I do about the no-show 1099? fill it out myself, give the client a copy, and proceed as if I had one issued by them?

2. this year, if my clients pay the LLC, will they escape the 1099 filing requirement, or is that goal only achievable via payment to the s-corp?
posted by mwhybark at 4:21 PM on February 6, 2011

Step 1: Get a CPA.
Step 2: Ask them.

In general? You don't *need* to get a 1099 like you *need* to get a W-2. It should all get filed as business revenues on whatever return you're filing for your business revenues (your schedule C for 2010, your schedule C and your 1120S for 2011). 1099s are only really 'needed' if you don't actually know yourself what you made. As long as your tax return reports more than the income the IRS has on file for 1099s, you're good. Their failure to file 1099s on time is their problem. If they don't file them until summer, they'll pay penalties for it.

But if you're doing something this convoluted, you need a CPA, like, ages ago, preferably before you did any of this business with S-Corps and LLCs, the former of which may possibly be exposing you to additional filing requirements and payroll stuff, and both of which are going to require a lot more tracking of what owns which assets and such. I'm sorry for assuming you don't know about this if you do, but a lot of folks don't.

Chances are very good that your important client's financial records are a mess and they aren't going to really have them sorted out until summer to be able to 1099 you. This is not good, but it's their problem, not yours. You pay based on your records, not the 1099s you get.
posted by gracedissolved at 4:58 PM on February 6, 2011 [1 favorite]

As I understand it, you still (are supposed to) pay the taxes on the income, 1099 in hand or not. And as far as I know, they're not obligated to give you one. This article seems to agree with me.

Further, since you know how much you were paid, what do you care? It's not like you're making up some number because you just don't know.
posted by Brian Puccio at 4:58 PM on February 6, 2011 [1 favorite]

The responsibility for filing the Form 1099 is on the organization paying for your services. It is your responsibility to report all income you received (whether or not covered by a 1099) and to correctly handle any Form 1099 you do, in fact, receive. If they don't issue you a 1099 don't file one for them, just report the income (e.g. if you are sole proprietor for federal tax purposes just include the income on your Schedule C).

When it comes to an LLC and 1099 forms what matters is the federal tax status of the LLC. If the LLC files its federal taxes as a partnership or sole proprietorship than companies who retain the LLC as a vendor must file a Form 1099-MISC if they made payments to the LLC. However, if the LLC files as a corporation than certain business-to-business payments will not require a Form 1099-MISC.

For Federal tax purposes, an LLC business entity must file as a corporation, partnership or sole proprietorship tax return. Assuming you don't have any partners, then using Form 8832 your single member LLC can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from yourself, a "disregarded entity".

If your single-member LLC is a sole proprietor for federal tax purposes, you should file a Schedule C (or E, F, or J) with your personal return. If your LLC is a corporation, it should file a Form 1120. Form 1120 is the corporate income tax return, and there are no flow-through items to your personal 1040 from the LLC's corporate return. However, if the LLC filed as an S Corporation, it should file a Form 1120S, and you should report the corporate income, credits and deductions on a Schedule K-1 (Form 1120) with your personal return.
posted by RichardP at 5:18 PM on February 6, 2011

mynameisluka, the IRS article you linked to is for W-2 forms and for 1099–R forms. Companies hiring contractors don't issue them 1099–R forms, they issue 1099-MISC forms. Normally 1099–R forms are used for retirement income (e.g. employer sends W-2 forms to its employees and 1099-R forms to its retired employes receiving pension payments). The original poster (mwhybark) should not attempt to file Form 4852 as a substitute for a missing 1099-MISC.
posted by RichardP at 5:24 PM on February 6, 2011,,id=199636,00.html

"A Form 1099-MISC is:

*Generally, used to report payments made in the course of a trade or business to a person who is not an employee or to an unincorporated business.
*Required among other things, when payments of $10 or more in gross royalties or $600 or more in rents or compensation are paid."

So, to boil it down from your answers:

1. Don't worry about the non-1099-filing client, file that revenue as non-1099-reported.

2. consulting revenue to the LLC may be exempt from the 1099 requirement if I elect to be taxed as a corporation on that revenue.


Finally, please note I did not seek advice regarding my decision to erect separate corporate structures, nor is it required. Additionally I did not mention nor imply that it was my intent to not pay taxes on non-1099 income. I most certainly DO intend to pay taxes on non-1099, if possible, the highest amount that I can. I do not regard taxes as a game intended to maximize personal cash retention.
posted by mwhybark at 5:54 PM on February 6, 2011

I'm a little confused about the distinctions you make about reporting business income for which you have a 1099 MISC in hand and business income income for which you do not have a 1099 MISC, i.e. you've said things like "There is a line-item for non-1099 income" and "file that revenue as non-1099-reported", etc. There is no difference in how you handle business income for which you have a 1099 MISC and income for which you do not, as a sole proprietor all of you business income should appear on line 1 of Schedule C. You don't even need to include a copy of the 1099 MISC itself unless the 1099 MISC indicates that tax was withheld.
posted by RichardP at 10:05 PM on February 6, 2011

Thanks for asking.

There's a section in my online tax program which asks for the services-based income, and begins by having you copy the 1099 info. The interview section then notes that businesses which have not provided the 1099s at over $600 remitted are in violation, and that the income should be reported as income lacking 1099s, and provides form entries to do that. Or something along those lines.

I could go to the site and copy the lingo directly, if you like.

The income is all being reported under schedule C, 1099, retail, and non-1099, as I was a sole prop last year.
posted by mwhybark at 11:32 PM on February 6, 2011

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