Which 1099 box does an owner report commissions income?

[tbexflyer5280]

2 owners that pay ourselves (split 100%) of commissions.  How do we report on 1099?

[DianeW]

A Form 1099-MISC is not used for a self employed business owner, a partnership, an S Corporation.  The information below will provide more detail about your situation.  If you have a different entity for the 2 owner business and you should complete the 1099-MISC forms, the amount would be listed as "Nonemployee Compensation", box 7.

You are not allowed to pay yourself and then use it as a deduction on your tax return as a self employed person.  The owner of a business such as a sole proprietorship or single member LLC cannot be an employee of that business. Additionally, for tax purposes, the IRS views such a business as a disregarded entity.

You cannot deduct the sole proprietor's own salary or any personal withdrawals made from the business.  For more information click the link below.

• IRS - Paying Yourself in a Small Business

If you split the income and expenses without a separate entity established, you do not list any payments made to yourselves as an expense.

[Carl]

"2 owners that pay ourselves"

It matters if the business is a partnership filing a 1065 partnership return, an S-Corp filing an 1120-S return, or a C-Corp filing an 1120 return. Generally, the owners of any of those types of businesses will NOT issues themselves a 1099-MISC. THey will issue themselves a K-1 for their share of the profits, and can also potentially issue themselves a W-2 if they were an employee of the C-Corp or S-Corp. Owners of a partnership that's filing the 1065 Partnership return can not be employee of that partnership business.

But issuing yourselves a 1099-MISC means that you will report that 1099-MISC income as a physically separate SCH C business on your personal tax returns, that is completely separate from whatever business type you are partners in. You're paying more in taxes (particularly self-employment taxes) than you need to, if you issue yourselves a 1099-MISC.

[DianeW]

@Carl Thank you for the additional information.

[Carl]

I could see how you were interpreting the post. At first, I interpreted it the same way. Then I looked at the other possible ways and realized our assumptions could be wrong. Just covering all the bases is all.