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Assielle
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Will a 1099 need to be sent to a sole proprietor?

Resolved Question:

Do I need to send 1099 to sub-contractors working for me who are an LLC?

Submitted: 8 years ago.
Category: Tax
Expert:  Assielle replied 8 years ago.

Thank you for your question.

Unless the company in question is a corporation, such as an S-Corporation,
or if you paid them less than $600, then yes, you need to send the company
a 1099-MISC form. Generally a Limited Liability Company (LLC) is not a
corporation, but all you have to do is contact the company and ask them if
they are an S-Corp (S-Corporation), etc. to make sure.

If the company provided you a Social Security number instead of an EIN
(Employer Identification Number) then they would appear to be operating
as a sole proprietor LLC, which is not a corporation.

You'll need to file a 1099-MISC for each person to whom you have paid at least $600 in rents, services, etc.

Some payments are not required to be reported, even though they may be
taxable to the recipient or otherwise meet the reporting requirements.
These exceptions include:

Payments to a corporation ..."

If you are unable to ascertain if the company in question is a corporation,
you can just send them a 1099-MISC anyway.

When in doubt, issue a 1099. That's what many companies do. We don't know if that's right or wrong, but there are no penalties for issuing a 1099 where one isn't required. Thus, many businesses issue a 1099 for equipment or other purchases or to a
corporation where they're not sure if the entity is a corporation or a
partnership, LLC, etc.

The safest bet is to send 1099s to any contractor that is an LLC, a limited liability partnership (LLP), a business trust or other unincorporated business entity.

If you are working on this year's taxes, keep in mind that you should have
already mailed 1099-MISC forms to companies as of January 31, or there might
be a penalty. If that is the case, it might be in your best interest to
contact the company in question and find out if they are a corporation, as
that might negate the need to send a 1099.

Also make sure the company's Taxpayer Identification Number (TIN), which could
be a Social Security number, EIN, etc., matches their company or individual's
name, as a mistake there could trigger a penalty as well.

Assielle,
Category: Tax
Satisfied Customers: 4606
Experience: 
Assielle and 2 other Tax Specialists are ready to help you
Customer: replied 8 years ago.

What if they do issue you a EIN could they be considered a LLC. I know it;s a gray area - how do you think the labor department would look at it? LLC, a corporation or a Sole proprietor? Thanks for your help.

Expert:  Assielle replied 8 years ago.

An LLC will not be a corporation unless they are an S-corporation. Even with an EIN, a LLC is most likely to be viewed as a company that requires a 1099. It is seldom to find that a LLC is designated as an S-corp or a sole proprietorship.

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