Can I include a 1099-MISC made to me in my 1120S or I have to use Sch C and 1120S?

[pennosso]

1st year filing 1120S. I have 3 vendors. One of them paid me a few times during the year (around $20K) which I deposited to my business bank account with all the other payments received. Now this vendor gave me a 1099-MISC under my name, not to my company. (I already talked to them and they will not change it).

Can I include this 1099-MISC in the income of the 1120S even though is under my name? I don't want to receive a letter from the IRS asking for the income in the 1099-MISC since it is under my name and Social Security.

If not, I'm going to have a problem with the Balance Sheet in the 1120S and the Balance Sheet I pulled from QB. Any suggestion?

Thank you in advance.

[Critter · Accepted solution]

Here is the easy way to fix this ... you will enter the income on the 1120S like normal.

Then in the personal return you will also enter it on the Sch C  BUT  you will also enter the same amount as an expense ... in the misc expenses section make your own category called "1099 income reported on form 1120S".  

This way the income goes to the correct place AND the IRS sees the income where it is expected.  Then make sure that person  is given a W-9 form so that they only write checks to that entity so you don't have a repeat of this situation.

[pennosso]

W-9 issue has been addressed. Thanks a million for your quick response, I very much appreciate it.

[JulieCo]

Yes, report the 1099 MISC income on your 1120S return since it was for your business.  BUT, note that you may get a letter from the IRS stating you didn't report it on your personal return.  If so, you should be able to respond to the IRS in writing that it was business income and was included on your 1120S return.  Plus, you can provide the proof that all the funds reported on the 1099 MISC went directly into your business bank account, so you will want to make sure to keep copies of the paper trail that all the checks received went into your business account and submit copies to the IRS if they do send you a letter.

Also, as noted, a workaround for this scenario to avoid the IRS flag is to also enter the 1099 MISC income on your personal return, plus enter the amount of the income as a business expense so make the effect wash (zero effect) on your personal return. Enter the expense as a Miscellaneous Expense with a description that the income was reported on your 1120S return. 

You also will want to submit an updated W-9 form to your vendor and request them to make future payments to your business instead of to you.    https://www.irs.gov/pub/irs-pdf/fw9.pdf

[Edited 2/15/18|5:09 pm]

[pennosso]

Both answers send me in the right direction and make sense to me. Thank you so much for your quick response as well Julie.