Tax Question – Issuing MISC-1099 to a LLC

Question:  Do I need to issue a 1099 MISC for services paid to a LLC?

Answer: It depends on how the LLC is taxed.  According to the IRS, you must file a 1099 MISC for each person whom you have paid during the year, at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, health care payments, crop insurance proceeds, cash payments for fish or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate.

If the person you are dealing with set up a single member LLC and is not taxed as a  corporation, the LLC is treated as a disregarded entity for tax purposes.  In this case, you do need to issue him/her a 1099 MISC.

If the person has a single member LLC and is taxed as a corporation, then you do not have to issue the LLC a 1099 MISC.

If the LLC has multiple members and is not taxed as a corporation, the LLC is taxed as a partnership.  You do need to issue the LLC a 1099 MISC.

Basically, you do not have to issue a 1099 MISC to a LLC that has elected to be taxed as a corporation.

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IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.

One Response to “Tax Question – Issuing MISC-1099 to a LLC”

  1. […] Tamo42, agreed about the US contractors, which is why I specified US contractors in my questions. Disagree slightly about sending 1099's to US businesses. You do not have to 1099 an incorporated business, but you do need to send 1099's to LLC's, LP's etc unless they elect to be taxed as a corporation. Tax Question – Issuing MISC-1099 to a LLC | ALG Tax Solutions […]