Does an S Corp Get a 1099? (The Rule and Its Exceptions)

P112: /tax-answers/does-an-s-corp-get-a-1099/

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Meta Description: S-Corps generally don't get 1099s for services, but must receive them for medical payments, attorney fees, and legal settlements. Learn the 2025 rules.

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      "text": "S-Corporations generally do not receive Form 1099-NEC for services performed, with the same exceptions that apply to C-Corporations. However, you must issue a 1099 to an S-Corp for: (1) medical and health care payments of $600 or more, (2) attorney fees of $600 or more regardless of the attorney's entity type, (3) gross proceeds paid to attorneys in legal settlements, and (4) substitute payments in lieu of dividends or tax-exempt interest. To determine if a vendor is an S-Corp, request Form W-9—Box 3 will indicate 'S Corporation' if they file as an S-Corp."
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H1

Does an S Corp Get a 1099?

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ANSWER SECTION

S-Corporations generally do not receive Form 1099-NEC for services they provide to your business, following the same rules as C-Corporations. However, there are four key exceptions where you must issue a 1099 to an S-Corp: medical and health care payments of $600 or more, attorney fees of $600 or more (regardless of the attorney's entity type), gross proceeds paid to attorneys in legal settlements, and substitute payments in lieu of dividends or tax-exempt interest. In 2025, if you pay an S-Corp $10,000 for consulting services, you do not need to issue a 1099—but if you pay an S-Corp law firm $5,000 for legal services, you must issue a 1099-NEC. Always request a Form W-9 from vendors to confirm their S-Corp status in Box 3.

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H2: The General Rule for S-Corps

No 1099-NEC required for services: Payments to S-Corporations for services are exempt from Form 1099-NEC reporting requirements, just like payments to C-Corporations.

Why S-Corps are exempt:

• S-Corps file annual tax returns (Form 1120-S) reporting all income
• Income flows through to shareholders via Schedule K-1
• The IRS tracks S-Corp income through EIN and shareholder reporting
• 1099 redundancy was eliminated by Congress

Practical example:

• You hire "Smith Consulting, Inc." (an S-Corp) for $25,000 of consulting work
• You pay them throughout the year
• No 1099-NEC required at year-end
• Smith Consulting reports the $25,000 on their Form 1120-S

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H2: The Four Exceptions for S-Corps

Despite the general exemption, you must issue 1099s to S-Corps in these situations:

Exception 1: Medical and health care payments (Form 1099-NEC)

• Payments of $600 or more to S-Corps providing medical services
• Includes doctors, dentists, chiropractors, physical therapists
• Medical labs and testing facilities
• Applies regardless of corporate status

Exception 2: Attorney fees (Form 1099-NEC)

• Payments of $600 or more for legal services
• Required even if the attorney is incorporated as an S-Corp
• Report in Box 1 of 1099-NEC
• Applies to all attorney compensation, not just litigation

Exception 3: Gross proceeds to attorneys (Form 1099-MISC)

• Gross proceeds paid to attorneys in settlement agreements
• Even if the attorney is an S-Corp
• Report in Box 10 of 1099-MISC
• Different from attorney fees—this is settlement-related

Exception 4: Substitute payments (Form 1099-MISC)

• Substitute payments in lieu of dividends or tax-exempt interest
• Report in Box 8 of 1099-MISC
• Applies to S-Corps holding investments on behalf of clients

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H2: How to Determine if a Vendor Is an S-Corp

Request Form W-9: The only reliable way to know a vendor's tax status is to have them complete Form W-9 before making payments.

W-9 Box 3 tells you:

• "S Corporation" = No 1099 for services (but watch for exceptions)
• "C Corporation" = Same rules as S-Corp
• "Partnership" = 1099 required for services
• "Individual/Sole Proprietor" = 1099 required
• "Limited Liability Company" = See Box 4 for tax classification

W-9 Box 4 for LLCs: If Box 3 says "Limited Liability Company," Box 4 indicates how the LLC is taxed:

• "S Corporation" = Treated as S-Corp for 1099 purposes
• "C Corporation" = Treated as C-Corp for 1099 purposes
• "Partnership" = 1099 required
• "Disregarded entity" = 1099 required

Best practice: Request W-9s from all vendors before the first payment. Don't wait until year-end when vendors may be slow to respond.

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H2: S-Corp vs Other Entities: 1099 Comparison

Payment Type	S-Corp	C-Corp	Partnership	Sole Prop
General services	No	No	Yes	Yes
Medical/health care	Yes	Yes	Yes	Yes
Attorney fees	Yes	Yes	Yes	Yes
Legal settlements	Yes	Yes	Yes	Yes
Rent ($600+)	No	No	Yes	Yes
Royalties ($10+)	No	No	Yes	Yes
Commissions	No	No	Yes	Yes

Key insight: The only difference between S-Corps and C-Corps is how they're taxed internally. For 1099 purposes, they're treated identically.

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H2: Common Mistakes to Avoid

Mistake 1: Assuming "Inc." means C-Corp A company named "Smith Inc." might actually be an S-Corp or even an LLC. Always verify with a W-9.

Mistake 2: Missing the attorney exception Many businesses don't realize they must 1099 incorporated law firms. This is a common audit issue.

Mistake 3: Confusing S-Corp owners with S-Corps

• Payments to an S-Corp: No 1099 (generally)
• Payments to an S-Corp owner as an individual: 1099 required
• Payments to S-Corp owner as W-2 employee: W-2 required, not 1099

Mistake 4: Not getting W-9s upfront Waiting until January to collect W-9s results in delays, missing information, and potential penalties.

Mistake 5: Ignoring medical payments to S-Corps Medical corporations are often S-Corps. These payments require 1099s even though they're corporations.

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H2: Related Tax Questions

Learn about corporation 1099 rules in general in our guide on whether corporations get 1099s covering C-Corps, S-Corps, and LLC rules.

Understand LLC 1099 requirements in our guide on whether an LLC gets a 1099 covering tax classification impacts.

Learn about partnership 1099 rules in our guide on whether partnerships get 1099s with general partnership and LLP guidance.

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