Does an LLC S Corp get a 1099? As an LLC that has elected S-Corp status for tax purposes, the answer is “No.” You are not required to receive a Form 1099 from clients or businesses that contract with you. Instead, you report your earnings directly to the IRS.
However, there are certain payments you make to businesses you hire that you must report on a 1099-MISC form. Let’s look at 1099s and when you need to handle them in North Carolina.
What is an LLC S Corp in North Carolina?
As an LLC that elects S-Corp status for Federal tax purposes, you don’t need to receive 1099s for your work. Your members are not self-employed. Instead, the company treats them as employees or members of the LLC.
An LLC S Corp in North Carolina is a limited liability company that has chosen to be taxed as an S Corporation by the IRS. This election means that the company’s profits and losses pass through to the individual members of the LLC who pay the taxes on their personal income tax returns.
An LLC S Corp is not required to receive a Form 1099 from clients or businesses that contract with it. Instead, the company reports its earnings directly to the IRS. However, you must report payments to your vendors on Form 1099.
Which Payments Do I Report on a 1099-MISC Form?
As an LLC with S corp election, you will need to report payments made to independent contractors for services on Form 1099-NEC (Non-Employee Compensation) if they cost more than $600 for the year and are part of your business needs:
- Payments made to sole proprietors and partnerships
- Non-employee payments made throughout the year to independent contractors
- Other payments required by the IRS
When reporting these payments, you will include their name, address, and Social Security number or taxpayer identification number. You will also need to indicate the amount you paid and the date.
You will use Form 1099-MISC to report direct sales of at least $5,000 in consumer products to buyers anywhere other than a permanent retail establishment. And if you withhold federal income taxes using the backup withholding rules, you issue a 1099-MISC, regardless of the total payment amount. (1)
Why Elect the S Corp designation?
There are a few reasons why you might choose to elect the Federal S Corp designation for your LLC.
The main reason is that it can save you money on taxes. As an S Corp, your LLC’s income is only taxed once, at the individual member level. Unlike a C-corp, you don’t need to pay corporate taxes on your LLC’s income.
Another reason to elect the S Corp designation is that it can help you avoid the self-employment tax. The self-employment tax is a Social Security and Medicare tax that self-employed individuals typically pay. However, because LLC members are not self-employed, they do not have to pay this tax.
According to Smart Asset, “The S corporation is the only business tax status that lets you save on Social Security and Medicare taxes while avoiding double taxation. An LLC taxed as S corp offers benefits of a corporation while also providing flexibility on income treatment.”
Finally, electing the S Corp designation can give you more flexibility when it comes to how you structure your business. For example, if you have a partner who is also an employee of the LLC, you can choose to have that partner be treated as an employee for tax purposes and receive a W- two form rather than a K- one form.
When Do You File 1099 Forms with the IRS?
As an LLC registered S corp, you file 1099 forms with the IRS when you make payments to sole proprietors and partnerships or non-employee payments to independent contractors. You will need to file a separate form for each recipient. The deadline for furnishing forms to recipients is January 31.
As an LLC electing Federal S-Corp status, you don’t need to receive a Form 1099 for your services to other businesses. However, some of the companies you pay for services may require that you give them a 1099.
Consulting with an experienced business law attorney can help you understand how the structure of an LLC with an S election works in North Carolina.
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At Hopler, Wilms, and Hanna, our business attorneys help your company grow and thrive. We assist you in finding the most beneficial structure for your business. Our extensive experience in North Carolina means we know all of the applicable tax law, permits, due dates, business structure pros and cons, and more! Contact us today to find out how we can help you.