Do LLCs Receive 1099s During Tax Time? + FAQs

Lana Dolyna, EA, CTC

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Confused about which LLCs receive 1099s? You’re not alone.

According to a 2022 National Small Business Association survey, over 35% of small businesses file 1099 forms late or incorrectly, risking hundreds in penalties for each missed or incorrect form.

Quick Overview of 1099 Forms

A 1099 tells the IRS about certain income paid to people or businesses. Companies use 1099s to report payments to non-employees, like freelancers or contractors. If your LLC receives money for services, rent, or royalties, you may see a 1099 in your mailbox.

Example

A marketing firm hires a graphic design LLC. It pays $1,200 during the year. If the LLC type requires a 1099, the marketing firm issues a 1099-NEC for $1,200.

Which LLCs Usually Get a 1099?

LLCs differ based on how they elect to pay taxes. This election affects if they receive 1099 forms. Below are the main LLC tax types and how each interacts with 1099 requirements.

Single-Member LLC: Expect a 1099

A single-member LLC often operates as a “disregarded entity.” The IRS treats the owner and the LLC as one for tax purposes. If you run a single-member LLC, you file your business income on Schedule C with your personal tax return. Clients and other payers typically issue a 1099-NEC when they pay you more than $600 for services in a tax year.

Why They Get 1099s
Single-member LLCs have no corporate protection from 1099 rules. In most cases, the IRS wants to track these payments, so payers must report them.
Payment Threshold
If you receive under $600 total for the year from one payer, they do not need to send a 1099. But if you exceed $600, they must issue one.

Example

Maria runs a single-member LLC for web design. She earns $800 from a local clinic. The clinic gives Maria a 1099-NEC.

Multi-Member LLC: Expect a 1099

A multi-member LLC usually defaults to partnership status unless it elects to be taxed as a corporation. Partnerships file Form 1065 and issue Schedule K-1 to each partner for their share of income. Like single-member LLCs, multi-member LLCs in partnership form usually receive a 1099-NEC for service payments over $600.

Why They Get 1099s
A partnership is not considered a corporation. The IRS needs businesses to track payments. Payers must file 1099s to report the money paid to the LLC.
Flow-Through Structure
The LLC reports all income on its partnership return. Each partner’s share flows to their personal return via a K-1.

Example

Two friends form a multi-member LLC for software consulting. A client pays $5,000. The client issues the LLC a 1099-NEC. The LLC reports the income and splits it among the partners on their tax return.

LLC Taxed as an S-Corporation: Usually No 1099s

An LLC can file Form 2553 to be taxed as an S corporation. In this case, the IRS treats the LLC as an S corp for tax. Businesses generally do not issue 1099-NECs for service payments to S corps. However, S corp LLCs might still receive a 1099-MISC for rent or royalty income over $600.

Why They Usually Avoid 1099-NECs
The IRS exempts most corporations (including S corps) from standard 1099 service reporting. The idea is that corporations have other reporting structures.
Exceptions
Legal fees over $600 often trigger a 1099-NEC, even if the LLC is taxed as an S corp. If you receive rental payments, you can expect a 1099-MISC instead.

Example

An LLC taxed as an S corp fixes computers for local offices. The offices do not issue a 1099-NEC for that service. But if the S corp rents gear to them, they send a 1099-MISC.

LLC Taxed as a C-Corporation: Usually No 1099s

An LLC can also elect C corporation status using Form 8832. Like S corps, C corps usually do not receive 1099-NECs for services. They may still get a 1099-MISC for rents or royalties. Large or foreign-owned LLCs often pick C corp taxation for various reasons (like growth plans or investor requirements).

Why They Usually Avoid 1099-NECs
Payments to corporations typically do not require 1099-NECs for standard services, aside from legal fees or medical payments.
Exceptions
If you receive rent, royalty, or medical payments, the payer issues a 1099-MISC. Legal fees above $600 also require 1099-NECs, even if you are a C corp.

Example

An LLC taxed as a C corp rents a warehouse to a sporting goods store for $1,000 per month. The sporting goods store issues a 1099-MISC for the $12,000 total rent that year.

General Rules on LLCs and 1099s

LLCs do not all follow one rule for 1099s. Instead, the tax status of the LLC decides if they get a 1099. If an LLC is taxed like a sole proprietorship or partnership, they typically receive a 1099-NEC for service payments over $600. If they choose S or C corp status, you do not issue a 1099-NEC for most services.

Services Over $600

Single-member and multi-member LLCs (not taxed as corporations) get a 1099-NEC for services if the total is $600 or more per year.

Rent and Royalties

A 1099-MISC applies to rent over $600 or royalties over $10. Even if the LLC is taxed as a corporation, rent and royalty payments can lead to a 1099-MISC in certain cases (for example, if the LLC is not recognized by the payer as a corporation).

S and C Corp Exceptions

LLCs taxed as S or C corps skip the 1099-NEC for services.

But legal fees to these LLCs still need a 1099-NEC if they exceed $600 (IRS Instructions for Form 1099-NEC).

Verify Classification

Always use Form W-9 to confirm how the LLC is taxed. Names alone are not enough. The W-9 form states whether the LLC is taxed as a sole proprietor, partnership, S corp, or C corp.

Exceptions

Many business owners think all service payments require a 1099. That is not always true. The IRS lists several exceptions:

Payments to Corporations

Payments to corporations do not require a 1099-NEC (unless they are for legal services). If an LLC has S or C corp status, you skip the 1099 for general services.

Payments Below $600

If the total service payments stay below $600 for the year, you do not issue a 1099. Still, the recipient must report the income. But the payer has no 1099 duty.

Merchandise or Goods

You do not send a 1099 for items you buy and resell. This covers inventory, supplies, and products. IRS Publication 334 clarifies that 1099s apply to services, not goods.

Employee Wages

Wages to employees go on a W-2, not a 1099. Check if a worker meets the employee vs. contractor guidelines in Publication 15 (Circular E).

When a Taxpayer Must Issue a 1099

You must issue a 1099 if you pay an unincorporated business, like many LLCs, $600 or more for:

Nonemployee services (1099-NEC)
Rent (1099-MISC)
Royalties over $10 (1099-MISC)
Legal fees over $600 (1099-NEC), even if the recipient is an S or C corp
Certain medical or healthcare payments (1099-MISC)

These rules come from 26 USC § 6041 and the relevant IRS forms. You also send a copy of the 1099 to the recipient and file with the IRS. Failing to do so can lead to penalties.

Quick Example

A store hires a single-member LLC for cleaning services each week. Total payments for the year reach $1,200. Since the LLC is not taxed as a corporation, the store must issue a 1099-NEC by January 31 of the following year.

Penalties

Late or incorrect 1099s can lead to penalties under 26 USC § 6721 and 26 USC § 6722. The IRS sets penalty amounts based on how late you file and whether you correct the errors quickly:

Filed Late (Within 30 Days of Due Date): $50 per return.
Filed More than 30 Days Late but Before August 1: $110 per return.
Filed After August 1 or Not Filed At All: $290 per return.
Intentional Disregard: $580 or more per return, with no maximum limit in some cases.

These penalties apply both for failing to file with the IRS and for failing to provide recipients with their 1099 copies.

Practical Warning

If you discover an error, file a corrected 1099 right away. Prompt corrections can lower or remove penalties.

Deadlines

The IRS sets strict deadlines for 1099 forms. Missing them can cause penalties. Key dates include:

January 31

Send 1099-NEC to recipients.
File 1099-NEC with the IRS (paper or electronic).
Provide 1099-MISC to recipients if reporting any nonemployee compensation in Box 7 (old rules) or Box 1 (rent) if required by law. (Check current instructions; the 1099-NEC replaced Box 7 nonemployee comp starting in 2020.)

February 28

Deadline to file 1099-MISC with the IRS on paper if it does not include nonemployee compensation.

March 31

Deadline to e-file 1099-MISC if it does not include nonemployee compensation.

March 31

File Form 8809 to request more time. The IRS may grant an automatic 30-day extension in some cases.

Pro Tip

If you file late, you risk penalties. Mark your calendar so you stay organized. E-filing can reduce the chance of mailing delays.

Avoiding Common Mistakes

Finally, here are some additional IRS regulations and tips that businesses often overlook when dealing with 1099s and LLCs

Always Use Form W-9 to Confirm LLC Status

Don’t guess an LLC’s tax classification. Have the vendor fill out Form W-9 before you pay them. On the W-9, an LLC can indicate if it’s a C corp, S corp, partnership, etc. This way, you know for sure whether they should get a 1099.

Example:

An LLC might check the “Limited liability company” box and write “S” if they are an S corp. If they leave that section or mark “Individual/sole proprietor,” then you know they’re not a corporation and a 1099 will be needed. This simple step saves confusion later and is recommended by the IRS and tax professionals.

When in Doubt, Issue a 1099

If you cannot determine an LLC’s status (say they never returned a W-9) and you suspect they’re not a corporation, it’s safer to send a 1099. The IRS does not penalize you for issuing a 1099 that wasn’t actually required, but they can penalize you for failing to send one that was needed.

As one tax expert notes, there are no penalties for filing too many forms, but there are penalties for missing a required form. So err on the side of caution – better to overshare information with the IRS than to leave something out.

Watch Out for Changing Elections

An LLC might change its tax election (for example, a sole-proprietor LLC might elect S corp status starting this year).

If you have a long-term contractor who switched to S corp, your 1099 obligation could change. Always use a fresh W-9 if a vendor tells you they changed their tax setup. The requirement can shift from needing a 1099 in one year to not needing it the next (or vice versa) if their tax classification changed.

Understand Form 1099-NEC vs. 1099-MISC

Starting in 2020, the IRS split out nonemployee compensation to a separate Form 1099-NEC.

Most payments to contractors (including LLCs that need 1099s) will go on the 1099-NEC (for services). Other types of payments (like rent, royalties, or attorney settlement payments) go on Form 1099-MISC.

Be sure you’re using the right form for the type of payment. For instance, pay for consulting work goes on 1099-NEC, whereas rent to an LLC landlord goes on 1099-MISC (assuming a 1099 is required in both cases).

This is more about form selection, but it’s a detail small businesses should be aware of when filing.

FAQs

Get answers to common questions 1099s and LLCs.

My LLC is an S corp. Do I get a 1099 for my service work?

Usually no. S corps do not get 1099-NECs for most services. But rent or royalties still require a 1099-MISC.

I run a single-member LLC. Does 1099 income go on my personal return?

Yes. Single-member LLCs are disregarded entities. You file a Schedule C with your personal return.

The contractor won’t give me their TIN. What do I do?

Ask for a Form W-9. If they refuse, you must do backup withholding at 24%.

Can I fix a 1099 after filing?

Yes. Use a corrected 1099. Check the “Corrected” box and send it to the IRS and the recipient.

What if I pay by credit card?

No 1099 is needed. Credit card processors report those payments on a 1099-K.

Do I fix my taxes if I overpay or underpay based on a 1099?

Yes. Report accurate income. If you owe more, pay. If you overpaid, claim a refund.

I don’t know if I’m S or C corp. How can I tell?

You file Form 2553 to become an S corp or Form 8832 to choose C corp. If you filed neither, you default to sole proprietor (single-member) or partnership (multi-member).