What do you do when a business sends your business (we are an LLC, partnership) a 1099-nec?

[danielle-51]

We received a 1099-nec form from a customer, who is a business. In box 1. nonemployee compensation, there is the total this business has spent with us for 2022. What am I supposed to do with this form?  We are an LLC, partnership. The amount this business has paid us for 2022 is already included in our "sales". Do I deduct their sales from that amount, and report it some other way on our 1065? Why would one business send another business a 1099-nec?

[Anonymous_ · Accepted solution]

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@danielle-51 wrote:

Why would one business send another business a 1099-nec?

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Because your customer paid $600 or more to your partnership.

See https://www.irs.gov/instructions/i1099mec#en_US_2022_publink100019786

Regardless, if you reported the figure on the tax reporting form you received on your 1065 as sales, you are basically done; you do not need to also enter the figure from the 1099-NEC.

[Vanessa A]

Businesses are required to send anyone they pay more than $600 a 1099-NEC.  You do not need to do anything with it if you have already accounted for that income in your total sales.  If you did you would double report the income.  

Simply keep the 1099-NEC for your records, but do not enter it on your return since you already entered that income once. 

[danielle-51]

Thank you very much. None of our other customers send us 1099-necs, and we do not do that ourselves...is this a requirement?

[Anonymous_]

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@danielle-51 wrote:

None of our other customers send us 1099-necs, and we do not do that ourselves...is this a requirement?

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Yes, it is required, generally, but there are exceptions, particularly if the entity you paid is a corporation (other than payments to attorneys) rather than a partnership or individual.

See https://www.irs.gov/instructions/i1099mec#en_US_2022_publink100019786

[VolvoGirl]

They don't have to send it to other corporations or businesses.  They either didn't know or thought you are a Single Member LLC or sole proprietor or independent contractor.   It doesn't matter.  It's better to get a 1099NEC you don't need than not to get one.  As long as you report the income you don't need to enter the 1099NEC separately.  

[danielle-51]

This is all very helpful. To be clear, are you saying that since we are an LLC partnership, we, too, need to send every vendor who is also an LLC, a 1099-nec form stating what we have paid them in the box for nonemployee compensation, if it is more than $600?

[danielle-51]

As a multi-member partnership, do we need to be sending these out as well to anyone who is also an LLC? 

[Anonymous_]

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@danielle-51 wrote:

As a multi-member partnership, do we need to be sending these out as well to anyone who is also an LLC? 

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Yes, read the IRS article at the link below (note the exceptions for corporations).

https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-o...

[danielle-51]

I don't know what to do since it is already so close to January 31. I can think of 3 vendors that are an LLC.

[Anonymous_]

Obtain their EINs (issue W-9s to them) and then issue the 1099-NECs.

[AliciaP1]

You can use Form 8809 to file for a 30-day extension in order to gather the documentation needed.  Then you need to request a Form W-9 from your payees that received more than $600 in payments from you in 2022 that were for any of the types listed here:

• For each person to whom you have paid at least $600 for the following during the year (Form 1099-NEC:(
  • Services performed by someone who is not your employee (including parts and materials)
  • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
  • Payments to attorneys (including law firms or other providers of legal services)
• For each person to whom you have paid the following during the year (Form 1099-MISC:(
  • Rents (Box 1)
  • Royalties (Box 2)
  • Other income (Box 3), including prizes and awards
  • Federal income tax withheld (Box 4), including backup withholding
  • Fishing boat proceeds (Box 5)
  • Medical and health care services (Box 6)
  • Substitute payments in lieu of dividends or interest (Box 😎
  • Crop insurance proceeds (Box 9)
  • Gross proceeds paid to an attorney, for example in a settlement agreement (Box 10, but payments to attorneys for services are reported on Form 1099-NEC)
  • Fish purchased for resale (Box 11)
  • Section 409A deferrals (Box 12)
  • Excess golden parachute payments (Box 13)
  • Nonqualified deferred compensation (Box 14)

This reporting process is also not required if the business you paid is incorporated.  This means if the LLC's you paid have chosen to report their taxes as a corporation, you do not have to send a Form 1099.  This identification is found on Form W-9 in Box 3. 

@danielle-51