Hi
My CPA has issued 1099 on my behalf to my contractors, but I am not sure if she did it right...this is my scenerio.
I have 10 LLCs and each has its Tax Identification number. I own atleast 90 % share in each LLC. I have 15 contractors and they work on each of my LLCs throughout the year. I have seperate bank accts for each LLC and I pay the contractors based on the hours they spent on each LLC.
Now the scenerio: At year end contractor A earned $7000 from LLC-1 and $200 from LLC-2. My CPA issued 2 1099s for contractor A, total of $7,200. Her explanation is even though contractor A made less than $600 from LLC-2; still a 1099 needs to be issued for contractor A from LLC-2.
My logic is only 1, 1099 should be issued for $7000 for contractor A from LLC-1 only.
I've already tried...
Checked IRS website but it doesn't specify this kind of situation. Also my CPA thinks 1099 for total amount paid by "me" to contractor-A should be reported to irs. I think since each company [LLC] has its own tax identity, (though all amounts are paid by "me") if any contractor received less than $600 from any LLC that should be ignored.
Answers
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I think your CPA has a logic behind her decision. From your prespective you would show the entire amount paid in a Fiscal year as "contractor fees" in your tax return. If she is reporting the total amount to contractor-A it would only help contractor-A to report as income in his/her tax return. Though the onus is on contractor A to report total income a complete 1099 would be beneficial. If you are ever auditied by IRS atleast you can prove that you issued 1099 for correct amount to your contractors.
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