1099NEC's for IC's

[Margaret CPA in OH]

What do you folks do when a service is provided (say online) by an LLC re 1099NEC?  And if there is an equipment purchase and installation by an IC or LLC? With so many LLC's around these days, I'm getting a bit confused as to the reporting requirements.  And if a service is paid via debit/credit card online, not to worry as they would receive 1099K from the bank/cc company?  This isn't for myself, rather for my church.  They would like to not send any at all but I think a couple are required.

Thanks for clarification.  It used to be so easy or straightforward, or so I thought!

[Lee B]

The only way to know is to require a W 9 be filled out.

[Margaret CPA in OH]

Well, not exactly correct from my reading, cbslee.  I have had ALL vendors complete W-9's.  My question is whether services provided by LLC's should be reported on 1099NEC (as LLC's often are since they are not C-corps) and if a sole prop or LLC vendor provides goods AND services (equipment and installation) should be reported and, if so, separate the material aspect from the service.  Typically a sale includes installation and the vendor would have the equipment as COGS on Sch. C or, if filing as a p'ship, 1065, or, if filing as an S-corp, an 1120S.  The W-9 just has a check box to confirm legal status, not how a return is filed.

I'm also uncertain whether SAAS provided by an LLC warrants a 1099NEC or, if paid online, will receive a 1099K from the bank.  Just confused right now.

[Lee B]

You're making this way too complicated. I have never separated the materials and or equipment from the installation. 

Materials and or equipment are deducted in either COGS or as supplies by the recipient, no matter which return is filed and doesn't change the taxable income.

SAAS or online payments are not one of the factors that determine whether or not a 1099 NEC is filed.

The only way to comply is to file them all. The recipient is not our client.

[Lee B]

Example;  You receive a bill for $10,000 with a breakdown of Equipment - $7,000, Installation Supplies  - $250, and Installation - $2,750.

You send out a 1099 NEC for $10,000. The recipient deducts their cost for the equipment and supplies in COGS .

 

[BulldogTom]

1 hour ago, Margaret CPA in OH said:

My question is whether services provided by LLC's should be reported on 1099NEC

The W9 should answer that question if the vendor filled it out correctly.   In box 3 on Form W9, if they check LLC, then they are supposed to tell you how the LLC is taxed in the area to the right by putting in a "C" "S" or "P".   My rule of thumb has been if they don't fill it out correctly, they get a 1099.

Tom
Longview, TX

[BulldogTom]

1 hour ago, cbslee said:

... online payments are not one of the factors that determine whether or not a 1099 NEC is filed.

Disagree.   If you make payments to a vendor via CC or Payment App, the CC company is supposed to send the 1099K and you do not send a 1099NEC or 1099MISC.   That was made clear earlier this year.   The IRS does not want double reporting of payments made by CC.

If the church does not want to file 1099s, then pay everything to vendors eligible for 1099s via CC.

Tom
Longview, TX

[Lee B]

After doing some reading, I am wrong. You can also add Debit Cards to to Credit Cards.

What will be interesting is that Zelle claims they do not have to file any 1099 Ks because they are a different type of financial entity.

[BulldogTom]

33 minutes ago, cbslee said:

What will be interesting is that Zelle claims they do not have to file any 1099 Ks because they are a different type of financial entity.

I am waiting to see the IRS response to this one.   Gonna get some popcorn and see what happens when a company pushes back on the IRS.   Hasn't happened in a while.

Tom
Longview, TX

[Catherine]

Sending a 1099 is almost never wrong. If some entity gets a 1099-K as well as a 1099-NEC for the exact same income (unlikely) they can report both, and back one out as "reported on 1099-K and 1099-NEC but only received once" or something else that makes sense. 

[Terry D EA]

Margaret,

I'm going to jump in here. I was researching this very thing the other day. Below is a link to an article on Legal Zoom that should clear the mud. My companies are issuing 1099-NEC's to independent contractors who have provided a service. This doesn't involve the 1099-K. Yes, some entities may get the 1099K if they paid by credit card. Remember, the 600.00 rule is delayed for now. 

What is a 1099-NEC and when does my business need to issue one? | LegalZoom

I talked to the IRS the other day when trying to get access to The TIN system. I asked the 6 million dollar question, what do you do when the person or entity refuses to provide a W-9 or at the very least, provide their EIN or SS#. Do you put refused in the box? How do you avoid the penalties for failure to file the damned form? The profound response, "Great Question". Gave me a number to the fire system to ask them so I still don't know. My only suggestion to my client's is if the individual or entity refuses to complete a W-9, don't do business with them.

 

[Lee B]

I believe there is a backup withholding rule that applies.

[Slippery Pencil]

On 1/4/2023 at 8:26 PM, Catherine said:

Sending a 1099 is almost never wrong.

It's wrong if payment was made via credit/debit card.

[Max W]

8 hours ago, cbslee said:

I believe there is a backup withholding rule that applies.

Yes, 30%, I believe.

[Catherine]

10 hours ago, Slippery Pencil said:

It's wrong if payment was made via credit/debit card.

That's why I said almost.

[Carolbeck]

I Agree the 30% Backup withholding applies if recipient refuses to submit a W-9. However, hard to collect the

Backup Withholding from a recipient when it was a one-off service and payment was already issued prior to

having the mess of providing the 1099NEC etc that is dumped in your lap on January 28th...  Just Sayin..