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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22704
Experience:  Taxes, Immigration, Labor Relations
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One of my clients requires that I receive commission payments

Resolved Question:

One of my clients requires that I receive commission payments into my personal account (commissions from investment banking transaction) until by Brokers license is finalized, however the money really belongs to my LLC (not a single member). If I deposit the funds and immediately cut a check to the LLC, how can I avoid 1) having to claim it on my personal return-since it was business income and 2) claim it as income on my business return not member contribution/equity?
Submitted: 11 months ago.
Category: Tax
Expert:  Lev replied 11 months ago.

Lev :

Hi and welcome to Just Answer!
You may simply report that income as received by the LLC and there should not be any issues - as long as the payer will report the payment using your LLC's tax ID - and not your personal SSN. Thus - if any reporting form will be issued for that payment - it will be reflected on the account related to the LLC in the IRS's system - and you would not have any issues.

Lev :

The issue might come if the payment will be reported using your name and your personal tax ID (SSN) - for instance - teh payer will send you the form 1099MISC - so in this case - the IRS would expect that income is reported on your personal tax return.

Lev :

In this case you woudl be a nominee. A nominee is someone who receives, in his or her name, income or interest that actually belongs to another individual or entity. Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient. It may be necessary for you to file with the IRS and furnish to the other owners a Form 1099.

Customer:

I anticipate that the 1099 will be sent using my social#. This is what I am trying to figure out, how to have it "flow" into my business and not me personally.

Customer:

What do you mean by furnish to the other owners a 1099? -issue my LLC a 1099 from me personally?

Lev :

If the form 1099 will be issued in your name and your SSN - you may not avoid reporting that fact.
There could be two ways to handle (1) you treat yourself as a nominee - see above. In this case you issue the form 1099 to the LLC and attach an explanation to your tax return.
Another way - to file schedule C - assuming that is your business income - and list the amount paid to the LLC as business expense - so your personal taxable income would be zero.

Customer:

Which way is more correct in the eyes of the IRS? Is the "nominee" label and actual recipient type with the IRS? -or would I just issue the 1099 to the LLC as: Payor: my name/social and Recipient: the LLC's name/tax ID? I guess what I'm wondering is whether there is a special step I need to take in order to notify the IRS of my nominee status.

Lev :

Both ways are correct - and are based on your perceptions. However the second way would be less questionable.
There is no "special step" - the issue is that because income is reported on your tax account - the IRS expects this fact to be reflected on your tax return - so you may not ignore that.
Regardless which way you choose - I suggest to attach a note to your tax return with full information and with the explanation of facts.

Customer:

Ok. If I opt for the 2nd approach would it be in my best interest to file a 1099 to the LLC as well (since it falls under the requirements of exceeding $600 of income)?

Lev :

If such payment is required to be reported on 1099MISC - you need to issue the form.
You may issue the form 1099MISC even if you are not required - just for tracking purposes.

Customer:

Ok, great! Thanks for your help!!

Lev :

You are very welcome. Please be sure to come back for all your tax related issues.

Customer:

Will do!

Lev :

Let me know if you still need any help?

Customer:

no, Im good thanks!

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22704
Experience: Taxes, Immigration, Labor Relations
Lev and 5 other Tax Specialists are ready to help you

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