You may be wondering if an LLC partnership gets a 1099-NEC. The answer is as long as it’s filing as a single-member LLC or a partnership, then yes, an LLC Partnership should receive and return a 1099-NEC tax form.
What Is Form 1099-NEC?
The 1099-NEC form is used by the Internal Revenue Service (IRS) to report payments made to non-employees, or independent contractors, who provide services directly to your business. The NEC stands for Non-Employee Compensation, referring to independent contractors who are paid by your business rather than full-time employees.
If you’re a Limited Liability Company (LLC) or an LLC Partnership and you have contractors working for you who have made more than $600 in services during that year, then you should send them this form at the end of the tax year (on or before December 31st) of every year they’re working for you.
Even if those workers aren’t technically independent contractors, you may still have to issue Form 1099-MISC if they’ve provided a service to you that was over $600 throughout the course of the year.
Your best bet as a business is to have a trusted business professional help you navigate which forms you should be filling out so you’re always staying on top of your business taxes.
When Does an LLC Partnership Get a 1099-NEC?
As an LLC Partnership, you may need to issue and receive a 1099-NEC form in a few different scenarios, like:
- Hiring an Independent Contractor: If you hire an independent contractor to perform services for your LLC Partnership who made more than $600 over the course of the year and that contractor isn’t considered an employee, issue them a 1099-NEC form. This could include services from a website designer, freelance writer, or business consultant.
- Renting Out Your Property: If your LLC Partnership rents out property to someone who isn’t an employee, they may need a 1099-NEC form. For example, if you rent out office space to another small business owner or another LLC, they might need to send you a 1099-NEC form if you received more than $600 in rent over the course of the year.
- Paying for Professional Services: If your LLC Partnership pays for professional services from a non-employee, like a lawyer or an accountant, you may need to issue a 1099-NEC form if you paid them more than $600 over the course of the year.
- Paying for Goods or Materials: If your LLC Partnership pays for goods or materials from someone who is not an employee, you might need to issue a 1099-NEC form if you paid them more than $600 over the course of the year. This could include custom creations or designs for your office space or contributions to a product you’re selling.
Remember, issuing a 1099-NEC form is an important part of your tax reporting responsibilities as an LLC Partnership; failing to fill it out and send it in could result in penalties. If you have any questions about when to issue a 1099-NEC form, consult with a tax professional or accountant to ensure you’re in compliance with IRS regulations.
Form 1099-NEC vs Form 1099-MISC
Form 1099-NEC is used to report payments made to a nonemployee contractor.
Form 1099-MISC is used to report miscellaneous income that isn’t specifically listed on the other forms, like paying attorney’s fees, awards, or healthcare for your employees.
If you have a side gig doing freelance work for clients, your client might send you a 1099-NEC form at the end of the year showing how much they paid you throughout the year. Even though you’re not technically an employee of this company (you’re just working for them), they still need to report their payments to IRS on Form 1099-NEC because it’s considered nonemployee work.
A 1099-MISC form would be used for other nonemployee payments such as healthcare payments or rent.
Understanding How LLCs are Taxed
How LLCs are taxed will differ depending on the type of LLC you have.
Single-member Limited Liability Companies (LLCs) are taxed as disregarded entities by default, meaning their income is taxed on the owner’s individual tax returns instead of a separate business tax statement.
The unique part of about single-member LLCs is that they also have the option to elect to be taxed as a corporation (by filing Form 8832) with the IRS to either be treated as a C corporation or by filing Form 2553 to be treated as an S corporation. This is one of the reasons why people love LLCs– they’re flexible enough that you can file as a corporation without having to jump through the hoops of changing your business structure.
Partnerships are also considered pass-through entities, which means members will pay their distribution of profits on their personal tax returns as opposed to a separate business tax return.
Relevant tax forms might include Schedule B-1, Scheduled K-1, K-2, and K-3, to name a few, all depending on how the business operated and what occurred the previous year. The IRS can give you a full view of the tax forms you need to fill out as a partnership.
If you’re part of an LLC partnership that elects to be taxed as an S corporation, then all profits are passed through to your shareholders who report them on Schedule E of Form 1120S.
If your business is organized under Subchapter C (C corporations) or Subchapter S (S corporations), then these entities must file separate tax returns with IRS Forms 1120 or 1120S respectively; but these returns include only corporate income taxes rather than personal ones like wages paid out by employers during any given year.
Deadlines for Sending 1099s to LLCs
LLCs may receive 1099-NEC forms from businesses that paid them $600 or more for services rendered. Businesses must file and send Form 1099-NEC typically on or before January 31st to their contractors.
What Happens During Failure of 1099 Submission?
If you fail to submit 1099s on time or submit incorrect information, you may face penalties from the IRS. The penalties for non-compliance depend on how much time has passed since the deadline and the number of forms involved, starting from around $50 to going up to $280 (or possibly more) per form and depending on how late it’s filed.
In some cases, though, the IRS will grant extensions for late 1099 submissions. Fill out Form 8809, the Application for Extension of Time to File Information Returns, to give you more time to submit the forms (note that you still need to have sent out your form to all recipients on time!)
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Where to send a 1099 form?
A 1099 form should be sent to the IRS, either through mail or online. Filing online will typically be a faster process, and using a service like doola will make it even faster.
Does an LLC C corporation get a 1099 form?
An LLC taxed as a C Corporation would not need a 1099 form; only if they’re taxed as a sole proprietorship.
Does an LLP get a 1099 form?
If they’ve received more than $600 as an independent contractor or company, then yes, they should receive a 1099 form. If they’re the ones paying you, then you should receive it if you’ve received over $600 from them as an independent contractor.