Have a Tax Question? Ask a Tax Expert
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.
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.
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.
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.
What do you mean by furnish to the other owners a 1099? -issue my LLC a 1099 from me personally?
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.
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.
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.
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)?
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.
Ok, great! Thanks for your help!!
You are very welcome. Please be sure to come back for all your tax related issues.
Let me know if you still need any help?
no, Im good thanks!