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Sub Contractor's Payment compliance and income Reporting in Business Return ?


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Sub Contractor's Payment compliance and income Reporting in Business Return ?

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Thanks for replies to my threads.

I am working as incorporated independent contractor(IIC) via own an S-corp for many years . I did provide services to Local Government and as tier-2 sub-contractors  to Federal large Prime contractors .

Past many years when we provided services thru another business entity as incorporated independent contractor, they made payments to our business accounts and we filed 1120S.

We used to get 1099-NEC at the year end to show our annual receipts to report on our 1120S.

As we worked with another entity for 2023 receipts, they are challenging the above practice . They are saying there is no obligation to report the payment made to our S-Corp to IRS using 1099-NEC. In addition, they claim there is no filing requirement of 1099-NEC with IRS for payment made to us.

The above entity provided us 1099-NEC for 2022, so we filed our business return without any issues.

As a Federal Contractors have an obligation to follow tax reporting / compliance. 

 

When contractor getting Federal $ for services, what are the filing/reporting requirement?

What are the checks and balances rules for federal sub contractors abide by ?

In addition, they claim they provided services to large corp, for which they are not receiving 1099/1099-NEC. It is puzzling me further.

Is this correct?

so, I IRS do not care, if business under report income. It looks like a big loophole for corp to hide receipts.

Is there a purpose of filing business return then?

After receiving payment, the business failed to file business return, how will IRS reconcile receipts/reporting ?

I see,

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This is because a business that sends you a Form 1099 also reports the information to the IRS. The IRS cross-references tax returns with other income records that businesses submitted. This can help reveal discrepancies or unreported income.

 

Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024) state
 
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Independent contractor or employee. Generally, you must report payments to independent contractors on Form
1099-NEC in box 1. See the instructions for box 1. Section 530 of the Revenue Act of 1978, as extended by section 269(c) of P.L. 97-248, deals with the employment tax status of independent contractors and employees. To qualify for relief under section 530, employers must file Form 1099-NEC. Additional requirements for relief are discussed in Rev. Proc. 85-18, 1985-1 C.B. 518. Also see Pub. 15-A for special rules that may apply to
technical service specialists and test proctors and room supervisors.


 

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2023 Instructions for Form 1120-S states

Amounts treated as compensation. The corporation may be able to deduct otherwise nondeductible entertainment, amusement, or recreation expenses if the amounts are treated as compensation to the recipient and reported on Form W-2 for an employee or on Form 1099-NEC for an independent contractor.

Questions 14a and 14b


If the corporation made any payment in 2023 that would require it to file any Form(s) 1099, check the “Yes” box for question 14a and answer question 14b. Otherwise, check the “No” box for question 14a and skip question 14b. See Am I Required to File a Form 1099 or Other Information Return on IRS.gov

 

 

What will be the position S-Corp owner act as incorporated Independent contractor and filing 1120S ?

Thanks for your guidance.

 

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Sorry but these are questions to ask the IRS and/or any tax advisors that you employ…

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I also own an S-Corp. I don't need any Form 1099's. They are not required for an S-Corp.

If you do your bookkeeping, it is not hard to figure out your corporate income. For me, it is basically all funds I deposit into my business checking account. I have a spreadsheet that I update about every 60 days that helps me to track income and expenses. I don't even use accounting software.

In summary, your clients aren't required to provide you with a 1099, nor should you need one to accurately report income and file tax returns.

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