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One of my partners (S-Corp) is starting a contract where the

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One of my partners (S-Corp) is starting a contract where the company is insisting that he bill as an individual instead of our company due to security clearance issues. He is intending to deposit the funds paid into the company account but we are wondering how to handle that tax wise. Can we as a company assume the tax liability when he will be issued a 10999 personally?

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Yes you can. You will need to disclose on his Schedule C that the 1099 amount is being corrected to the other entity. That entity will also need to make a reciprocal disclosure, usually on an attached statement "The company has received a 1099 form originally issued to XXXXX, Social Security number XXXX that is accurately attributable to company activities in the amount of XXXX". The IRS will accept the transfer as long as it appears as income and expense on his Schedule C and as income on the S Corp.

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