Are Incorporated Companies 1099? | Tax Rules You Need

No, most incorporated businesses do not receive 1099 forms for services, except for specific cases like legal and certain healthcare payments.

When you set up a corporation, one of the first tax questions that pops up is whether your company should send or receive Form 1099. The line between “needs a 1099” and “doesn’t need one” feels blurry, especially when you work with a mix of individuals, LLCs, and incorporated vendors.

This guide walks through how 1099 rules apply to incorporated companies in the United States, when the corporate exemption actually holds, the main exceptions, and how to build a simple process so you stop guessing each January.

Basic Overview Of 1099 Forms

Form 1099 is a family of information returns that tells the IRS and the recipient about certain types of income. For business owners, the most common versions are 1099-NEC for nonemployee compensation and 1099-MISC for a range of other payments such as rents, prizes, and some service categories.

The IRS explains the payer rules and exceptions in its instructions for Forms 1099-MISC and 1099-NEC, including when payments to corporations are reportable and when they are not.

1099-NEC: Nonemployee Compensation

Form 1099-NEC is the form many people think of when they talk about “sending a 1099 to a contractor.” You generally issue it when you pay at least 600 dollars in a year to a nonemployee for services in the course of your trade or business and that person is an individual, partnership, or certain types of LLC.

Current guidance from tax professionals explains that payments for services to corporations usually do not go on Form 1099-NEC, with a key exception for attorneys who receive legal fees even when they operate through a corporation or professional corporation. TaxAudit’s overview of Form 1099-NEC reflects that pattern and points readers back to the IRS rules.

1099-MISC: Other Business Payments

Form 1099-MISC covers a mix of payments, such as certain rents, prizes, awards, and in some cases health-related and legal payments. Under the IRS instructions noted above, many payments to corporations are not reported here either, though again there are exceptions for medical and healthcare payments and some legal payments.

When you hear that “corporations do not get 1099s,” that sentence usually points to the general rule for 1099-NEC and 1099-MISC. The rest of this article explains where that general rule stops.

1099-DIV And Investment Income

Not all 1099 forms relate to payments for services. Form 1099-DIV covers dividends and certain distributions from stocks, mutual funds, and similar holdings. The IRS gives payer instructions in its Instructions for Form 1099-DIV, and brokerages explain how this works in practice for investors. Fidelity’s explanation of Form 1099-DIV is one accessible overview.

These forms often reach the owners of incorporated companies personally when they hold stock in corporations, including their own closely held corporations that issue dividends.

1099 Rules For Incorporated Companies That Pay Or Get Paid

To decide whether an incorporated company is “1099” in a given situation, you need to sort out both the entity type and the kind of payment. Payers look at the information on Form W-9 from the vendor or service provider and then apply the 1099 rules to that combination.

In this section, think about two angles:

• When your corporation pays someone else and wonders whether to send a 1099.
• When your corporation receives income and wonders whether it should expect a 1099 from the payer.

General Exemption For Corporations

Under IRS rules, you usually do not send Form 1099-NEC or 1099-MISC to C corporations or S corporations for payments for services. This also covers LLCs that have checked the box to be taxed as C corporations or S corporations. Many vendors flag this on their W-9 by marking the “C Corporation” or “S Corporation” box in Part I.

This exemption helps reduce reporting for routine business-to-business payments between incorporated entities. The idea is that corporate income is already tracked in other ways, so payers do not repeat that reporting on a 1099 each year.

Noncorporate Entities And 1099 Requirements

Individuals, sole proprietors, and most partnerships fall under the 1099-NEC rules when they provide services and meet the dollar threshold. A single-member LLC that has not elected corporate tax treatment is usually treated like a sole proprietorship for 1099 purposes, so payers treat that recipient as an individual on Form 1099-NEC.

That means many of the vendors that “feel” like small businesses from the outside are still noncorporate for 1099 reporting. Your vendor list may mix them in with incorporated providers, so a clear W-9 collection process matters here.

Corporate Exemption With Important Exceptions

Even where a vendor is a corporation, you still may need to send a 1099 when you pay for legal or medical and healthcare services. The IRS instructions spell out that the usual corporate exemption does not apply to payments for legal services, and some medical and healthcare payments paid to corporations are reported on Form 1099-MISC as well. The same IRS instructions give detailed box-by-box rules.

This is why many payers treat law firms and healthcare providers as “always 1099,” even when those providers run as corporations or professional corporations. The entity label alone does not settle the question.

Table: Entity Types And 1099 Treatment For Services

The chart below gives a broad view of how different business types line up with 1099-NEC and 1099-MISC for service payments. Always confirm with current IRS instructions and your tax advisor for edge cases.

Recipient Type	Typical 1099 Service Rule	Notes
Individual / Sole Proprietor	1099-NEC usually required at 600 dollars and above	Includes many freelancers and gig workers.
Single-Member LLC (Disregarded)	1099-NEC usually required	Treated like an individual unless it elects corporate status.
Partnership / Multi-Member LLC	1099-NEC usually required	Entity is separate, but not a corporation for 1099 rules.
C Corporation	1099-NEC / 1099-MISC usually not required for services	Exception for legal and certain healthcare payments.
S Corporation	1099-NEC / 1099-MISC usually not required for services	Same exception pattern as C corporations.
LLC Taxed As Corporation	1099-NEC / 1099-MISC usually not required	W-9 will often show “C Corp” or “S Corp.”
Law Firm (Any Corporate Status)	1099-NEC or 1099-MISC often required	Legal fees and gross proceeds are special categories.
Medical / Healthcare Provider (Including PC)	1099-MISC often required	Instructions list medical and healthcare payments separately.
Foreign Entity Providing Services Outside The U.S.	Often no 1099 requirement	Handled with W-8 forms and separate sourcing rules.

Exceptions Where Incorporated Businesses Still Receive 1099 Forms

Even though corporations enjoy a broad exemption, several common situations still lead to 1099 forms. Knowing these helps you avoid missing a required filing or wondering why your incorporated company just found a 1099 in the mail.

Legal Fees Paid To Incorporated Law Firms

Payments for legal services often trigger 1099 reporting even when the law firm is incorporated. The IRS instructions explain that you must report certain attorneys’ fees on Form 1099-NEC and some gross proceeds on Form 1099-MISC, regardless of the firm’s corporate status.

If your corporation hires a law firm and pays at or above the threshold, your accounting team should treat those payments as reportable. On the flip side, if you run an incorporated law firm, you should expect 1099s from clients who follow the rules.

Medical And Healthcare Payments To Corporate Providers

Payments to doctors, clinics, and other healthcare providers can also be reportable even when the practice is structured as a corporation. The IRS treats many of these payments as medical and healthcare payments on Form 1099-MISC rather than simple fees for general services.

Hospital systems, group practices, and professional corporations in the healthcare field should keep an eye on these rules and make sure their W-9 forms are up to date so payers have accurate information.

Investment Income And 1099-DIV

Form 1099-DIV shows up when corporations or funds pay dividends and certain capital gain distributions to shareholders. Your own incorporated company might never receive a 1099-DIV, but you as an owner or investor often will when your holdings generate dividends through another corporation.

The IRS instructions for Form 1099-DIV and brokerage education pages describe how dividends, qualified dividends, and capital gain distributions are reported and how those amounts flow into the recipient’s tax return.

Backup Withholding And TIN Issues

When payers do not have a correct taxpayer identification number (TIN), or when the IRS has flagged underreported interest or dividend income, backup withholding can come into play. In these cases, the payer must withhold a flat percentage of certain payments and send that tax to the IRS, reporting the withheld tax on the 1099 form.

Corporations usually avoid backup withholding by providing complete and accurate information on Form W-9 and resolving any IRS notices promptly.

Table: Common 1099 Scenarios For Incorporated Companies

This second chart turns the rules into everyday situations so you can compare them with your own books.

Scenario	Who Receives The 1099	Form Used
Your C corporation pays a freelance designer who is a sole proprietor	Designer	1099-NEC if payments reach 600 dollars
Your S corporation pays a single-member LLC that is disregarded	Owner of the LLC	1099-NEC in most cases
Your corporation pays a law firm that operates as a professional corporation	Law firm	1099-NEC and possibly 1099-MISC, depending on the payment type
Your corporation pays a hospital system for employee flu shots	Hospital system	1099-MISC if payments meet medical and healthcare rules
You personally own stock in a public corporation that pays dividends	You as the shareholder	1099-DIV from the brokerage or payer
Your corporation hires another C corporation to handle routine IT support	IT service corporation	No 1099-NEC or 1099-MISC in many cases
Your corporation pays an overseas contractor who performs all work outside the U.S.	Foreign contractor	Usually no 1099; handled under separate non-U.S. reporting rules

Step-By-Step Way To Decide If A Vendor Is “1099”

When you add a new vendor or review your year-end list, a consistent process keeps you out of guesswork territory. Here is a simple sequence many payers use.

Step 1: Collect A Complete Form W-9

Before you pay a vendor for services, request a signed Form W-9. That form tells you the legal name, business type, and taxpayer identification number. Many accounting systems now attach a W-9 to each vendor record so the information is easy to reference at filing time.

Step 2: Check The Entity Box

Look closely at the box the vendor checked on Form W-9. If the vendor checked “C Corporation” or “S Corporation,” or notes that the LLC is taxed as a corporation, the general rule is that you do not issue a 1099 for ordinary service payments, subject to the legal and healthcare exceptions covered earlier.

If the vendor marked “Individual/sole proprietor” or “Partnership,” you treat that vendor as a likely 1099 recipient when the dollar threshold is reached.

Step 3: Look At The Type Of Payment

Even if the vendor is incorporated, ask what you are paying for. Legal services, medical and healthcare payments, some prizes, and certain rent and royalty payments have their own 1099 rules. That is why you sometimes see a corporation receiving a 1099-MISC or 1099-NEC while another corporation in a different line of work does not.

Step 4: Apply The Dollar Thresholds And Deadlines

Most 1099-NEC and 1099-MISC filings only apply once payments to a given recipient reach 600 dollars in a calendar year. Once you cross that level for a recipient that is not exempt, your accounting team adds that payee to the year-end 1099 list and follows the mailing and e-filing deadlines described in the IRS instructions.

Step 5: Keep Documentation In Case Of Questions

Save W-9 forms, invoices, and payment records for any vendor that might be reportable. If the IRS ever questions why you did or did not issue a 1099, those documents show how you reached your decision based on the information you had at the time.

What To Do When Your Incorporated Company Receives A 1099

Sometimes a corporation receives a 1099 even when it might not strictly need one. Other times, the form reflects a real exception such as legal or medical payments. Either way, you should not ignore it.

Check Whether The Form Reflects A Real Exception

Look at the form type and the box numbers. A 1099-NEC with legal fees in box 1 or a 1099-MISC with medical and healthcare payments usually lines up with the exception rules. A 1099-DIV reflects dividend income that often feeds into the company’s or owner’s tax return, depending on the setup.

Match The Amounts To Your Books

Compare the amounts on the form to your general ledger. Make sure the total matches what you actually received during the year. If there is a mismatch, contact the payer in writing and ask for a corrected form so your tax reporting and the payer’s reporting stay aligned.

Store The Forms With Your Tax Records

Keep any 1099s that reach your corporation in the same files as your other tax documents. Even if the form reflects a payment that your tax return already captures, it still helps to have the source document handy if the IRS asks questions later.

When To Bring In A Tax Professional

1099 rules look manageable in simple cases, but they can get tricky when you add foreign payees, complex ownership structures, or large volumes of small vendors. If your corporation falls into any of these patterns, or if you feel stuck on how to treat a mixed set of payments, a licensed tax professional can review your setup and help you design a clean process.

Even for smaller corporations, a one-time review of your vendor list and 1099 procedures can prevent years of repeat errors and late corrections. That time often costs less than dealing with penalty notices later.

Key Takeaways About Incorporated Companies And 1099 Forms

Most corporations do not receive 1099-NEC or 1099-MISC forms for routine service payments, but that general rule has clear exceptions for legal and healthcare payments and does not apply to dividend reporting on 1099-DIV. The best way to stay on track is to pair accurate W-9 collection with a simple decision process that checks both entity type and payment type against current IRS instructions.

If you treat 1099 compliance as a regular part of your bookkeeping rhythm instead of a once-a-year scramble, both your incorporated company and your vendors will have cleaner records and fewer surprises when tax season arrives.