Contractor vs. Vendor

Hi goldwire,
According to the IRS website for the 1099 Misc form, "Payments for services performed for a trade or business by people not
treated as its employees. Example: fees to subcontractors or directors,
and golden parachute payments."
You might want to contact your tax preparer for a more expansive definition.
Thanks for your post...Steve

Another distinguishing factor:

Vendors who are incorporated do not need to be 1099'd.

Contractor/employee distinction is spelled on on the IRS website, as Steve mentioned.

Hope this helps,

Laura

Thanks! That helps out a great deal that if the Vendor is incorported, no 1099 is necessary. That clears up my confusion and eliminates sending unnecessary forms out. We definitely work with incorporated vendors as well as contracting individuals.

Our company will save so much time and money this year!!!!

You are welcome.

Laura

This is probably a dumb questions, but:

If you don't have to send a 1099 to corps, how does the IRS know there was money exchanged for services?

A 1099 say's "I paid X amount to Fred the contractor for plumbing work"

But if Fred is incorporated where is my statement to the IRS?

Thanks in advance!

There might be a better way to answer this, but I will give it a shot. . .this is not intended to be tax advice, and I would suggest you get further counsel from your tax preparer on this subject.

Also, you might want to look at: http://www.irs.gov/instruction...

However, this is how I understand the general principle:

1099's are a way of reporting income paid to the contractor, who, otherwise, might not be reporting their income to the IRS. Not only are you giving your contractor a 1099, you are giving the IRS a 1096 which reports all of your 1099's for the year.

A corporation is already required to report their earnings to the IRS, so, generally speaking, there is no need for you to report your payments to them to the IRS.

Does this help?

Laura

I have been looking and looking and I cannot find where it says (on the IRS site) that corporations don't need 1099's. Can someone provide a link?

I believe it, but I am wondering because of something else. I know the IRS handles LLC's like Corp's sometimes. Do you know if LLC's need 1099's? Unless I find out otherwise, I'm going to send one to be safe, but I would love to know for sure.

Thanks,
Dan

Hi YoungWells,
Here is a link to the IRS 'Guide to Information Returns' .  If you can figure it out...let us know.
Thanks for your post...Steve

An LLC that is taxed as a corporation does not get a 1099.

S-Corps and C-Corps do not get 1099's

LLC's that are taxed as sole proprietors or partnerships do get 1099's.

This is the standard practice that the CPA's I work for use.

Hope this helps,

Laura

Thanks, Laura for shedding some light on this...