Why no 1099's for corporations?

It may have something to do with having to provide a balance sheet every year.

Note that law corporations are not exempt - they get 1099s because traditionally many of them have played "fast and loose" with the rules.

I wasn't aware of that. Is it in the regulations somewhere, or is it a more informal requirement?

___ Stu

As part of Obamacare, there is a requirement to issue 1099-MISC to corporations. This starts in 2012. There was talk of repealing the law as it would be very burdensome in terms of paperwork, and I'm not sure if that actually happened. I know the Senate voted to repeal it.

There was another law passed that became effective 1/1/2011 that landlords must issue 1099-MISC. So for example if you do repairs more than $600 to one place, you must issue a 1099-MISC for the amount.

I believe it is inconsistent to require 1099-MISC to people and not to corporations, but then again most of our business is often from corporations, and it's probably easier to audit corporations (like look at their credit card receipt of payments).

The requirement to send a 1099-MISC to corporations has been repealed. President Obama signed the bill repealing it on April 14, 2011.

Bob Sandler

This one?:

I thought the Obamacare 1009 provisions were repealed. But never mind what I thought - what are the facts here?

[...]

We could all benefit from a little more hard research and a little less voluntary recall on current status of tax laws as the calendar year end approaches.

Which resources are most preferred by tax professionals for the "latest and greatest"? Quickfinder/Taxbook? Other annual reference books? Year-end tax update CPE seminars? Professional organization journals? Tax research services?

Corporations can use a fiscal year accounting period (ie: a fiscal year ending September 30th) and it would be impractical to trace calender year 1099 information to such a return.

Further, corporations often use accrual basis accounting, whereas

1099s are always supposed to be issued on a cash basis (payments actually made). This again would make it difficult to trace payments in a meaningful way.

MTW

And technically speaking, so can individuals.

And, technically speaking, so can sole proprietors.

I prefer to say it's all politics.

Obamacare required that corporations be issued 1099s, and they hue and cry that arose made poliicians on both sides re-exempt corps.

Lots of small businesses just throw away 1099s received, and will receive a very nasty shock his year when told they have to break down income into 1099 income and other income.

please explain. Told by who? What is a small business? Schedule C only? How will the breakdown be reported? this is all news to me.

Long story, but bottom line is that ALL Schedule C income (except for statutory employees) goes on the same line for 2011 returns, no matter if or which of the 1099-X forms it is documented on.

In the beginning, the basic requirement was that all businesses paying $600 or more to a sole proprietor (Schedule C filer) for services must issue a 1099-MISC to that sole proprietor.

A law was passed that all credit card and other third party financial intermediaries must issue a 1099-K to their clients documenting the revenue processed.

The Health Care act provided that all businesses paying $600 or more to ANYONE for GOODS or services must issue a 1099-MISC to that entity.

A law was passed that classified rental real estate as business for the purposes of issuing 1099-MISCs.

In order that the IRS could track all this new information, it was speculation that forms used by business entities (including Schedule C) would require that revenue be broken down into these various categories.

The expanded requirements in the Health Care act were repealed.

The expansion to the rental real estate was repealed.

Schedule C was printed, showing a separate line for 1099-K receipts.

The IRS decided that the 1099-K process really wasn't ready for use, so the Schedule C instructions were issued saying to put -zero- on the

1099-K line, even if you received them.

Don EA in Upstate NY

Ah! Thanks for the update. I also see if you should have filed a 1099 they now ask you if you should have and if you did.

And I see there's no way from the Sch C alone to figure out how much mileage was in the first half and how much in the second half of the year.

Stu - This is covered on page 1 and 2 the 2011 instructions for Form

1099-MISC - and search for the word "attorney".

You can also check IRC 6041 & 6045

Gene E. Utterback, EA, RFC, ABA

Thanks. Very interesting.

___ Stu

Thanks everyone for all of the replies. It doesn't seem like there is any clear answer as to why 1099's are not required to be sent to most corporations. From all of the possible theories that were presented, the one that seems most likely to me is that corporations tend to have more shareholders than other types of entities, and they already have more requirements regarding accounting for and reporting income to their shareholders.

I don't recall whether I responded to your original post or not, so I'll do so now for informational purposes.

My understanding is goes like this -

1 - keep in mind that much of the tax law was written long ago, at a time when a corporation was a BIG deal and not something just anyone started up; 2 - corporations are assumed to be more sophisticated that the average individual - whether that is true or not remains to be seen; 3 - corporations, especially C corporations can elect any fiscal year they like. For any other entity to use a non-calendar year they have to file an IRC 444 Election and PUT ON DEPOSIT a dollar amount roughly equal to the amount of tax that is being deferred because of the fiscal year. This is a LOT of work and it costs money so few actually do it. Think about this -

A) my corporation has a July 1 to June 30 year end; B) your corporation has a October 1 to September 30 year end; C) 1099s get issued on a calendar year basis D) how would the government reconcile the 1099 to either the payor or the recipient in cases like this?

That's how it was explained to me. But for the sake of full disclosure, I don't actually know any more than you or anyone else. If you REALLY want to get a better grip on why you can research the appropriate Internal Revenue Code section and trace it back to the Congressional Committee reports and notes for the year the law took effect. This too is a LOT of work.

Gene E. Utterback, EA, RFC, ABA

I believe the reason corporations do not get a 1099, is because first, they will have (or should have) reported income from sales, and issue periodic financial statements. Adding 1099 income would be double counting. And then they are subject to audits, whereas independent contractors are not.

Any chance the answer could have changed in the nine years since that question was asked?

You may be thinking about public companies, that have disclosure requirements. Most corporations are private. And if they want to cheat, there's only the IRS to stop them.

But the exemption from filing a 1099 doesn't apply to law corporations. I guess they don't trust lawyers as much as they trust everyone else.