1099s for Corporations and Other 1099 Surprises
When your business pays $600 or more to an individual for services, you must issue a Form 1099-NEC to that person and file a copy with the IRS. This rule covers payments for professional services provided by attorneys, physicians, and other professionals if made as part of your business operations.
The surprising part is that this requirement extends to payments made to certain medical and legal corporations. Unlike other professionals, where you only send 1099s to individuals, legal and medical corporations must also receive these forms.
1099-NEC or 1099-MISC
-
Corporate Attorneys and Law Firms: Use Form 1099-NEC to report legal fees paid to attorneys operating as corporations. Use Form 1099-MISC for reporting settlement fees.
-
Medical Corporations: Use Form 1099-MISC for payments to corporations providing medical and healthcare services or those involved in billing and collecting payments for such services.
-
Veterinarian Corporations: If your business pays an incorporated veterinarian $600 or more in a year, you must report these payments to the IRS. Incorporated veterinarians are subject to reporting requirements because they provide medical and healthcare services.
-
Incorporated Hospitals and Extended Care Facilities: No reporting is required for payments made to hospitals or extended care facilities that are tax-exempt under Section 501(c)(3) or owned and operated by government entities.
Being aware of these requirements helps ensure compliance with IRS regulations and avoids potential penalties.
