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1099 for real estate commisions paid to S corp shareholder

Level 3

Realtor is sole owner in an S-corp.  Can she receive a 1099 for the commissions and a W-2 for the office work she does.  Could only find a single court case supporting it.

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Level 12

Sounds fine to me.  The fact this is a broker, not just an agent, helps.  I used to have a similar situation where the broker paid W-2 wages to a family member for office work, and 1099 commissions for sales. This was not done for tax reasons; it probably resulted in more tax being paid.  But it was a helpful arrangement when valuing the business when it was sold.  

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5 Replies 5
Level 15

No.  W-2 wages only for a Sub S shareholder.

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Level 12

A 1099 and W-2 from whom?  From her own S corporation, or from her broker?  I don't see a problem with her broker giving her corporation a 1099-NEC.  There may be state law that prevents that from flowing through to her on a 1099-NEC.  But the fuss about S corporations is that they are abused to avoid SE taxes.  That wouldn't happen in the situation you describe.  But I'm trying to understand what she is trying to accomplish by doing it that way.  

The fact that you can't find any court cases, just means that IRS hasn't issued many notices of deficiency where it saw a problem with this.  

Level 15

Are you stating that they are giving the office their SSN instead of the EIN of the S-Corp? The W-2 and 1099 are both in the SSN? 

If they are gonna be an S-Corp, they better learn how to act like one. 

 


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Level 3

No.  

S Corp has a single shareholder, who is also a broker/agent.

S Corp pays commissions to shareholder and other agents based on sales made.

S Corp pays  shareholder a salary to cover her management time.

S Corp gives shareholder a 1099 for sales commissions paid to her and a W-2 for management time.

S Corp gives 1099s to other agents for commissions paid to them.

Level 12

Sounds fine to me.  The fact this is a broker, not just an agent, helps.  I used to have a similar situation where the broker paid W-2 wages to a family member for office work, and 1099 commissions for sales. This was not done for tax reasons; it probably resulted in more tax being paid.  But it was a helpful arrangement when valuing the business when it was sold.  

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