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1099 Issued to Individual SS# and not the Corporation

yeknod
Level 2

TP setup a C-Corp to receive all the Income from Commissions.  The Broker sent the 1099 to the Individual and said they can't issue a 1099 to a Corp.  Only a LLC or PC or similar entities. 

How should the 1099 be handled on the TP's individual tax return? Show income on Sch. C then a Deduction for the same amount somewhere?  If so, where?

They are in FL and tried to register the Corp but received a letter basically saying that is not allowed.  I have asked them to check and see if an S-Corp would be allowed.

Thoughts?

 

Thanks in Advance!

 

 

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22 Replies 22
yeknod
Level 2

I didn't state the TP is a Real Estate Agent.  so, fyi

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Just-Lisa-Now-
Level 15
Level 15
are real estate agents allowed to be corporations in your state? some professions in some states you can't so theyd only issue a 1099 to the taxpayer.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Just-Lisa-Now-
Level 15
Level 15
Were the checks written to the corporation or to the taxpayer?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
yeknod
Level 2

To the taxpayer

Just-Lisa-Now-
Level 15
Level 15
If the checks were written to the taxpayer, it's not corporation income.
Why wouldnt he fill out the W9 as a corp, no 1099 would be issued at all (assuming real estate agents are allowed to be corporations).

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Taxes-by-Rocky
Level 5

Get a copy of the commission agreement / broker contract and see who signed them.  But if the corp.  wasn't set up in time (or not otherwise eligible to receive the income), you're probably stuck.

yeknod
Level 2

So, how do we treat the income issued by the 1099 to the TP?   Can we just treat it as a pass thru?   Put the income on the sch. C and then deduct it as some type of expense to zero it out since the Corp has claimed all the income on its tax return

 

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qbteachmt
Level 15

You indicated the registration of the C Corp didn't happen.

The 1099 issued to the TP would either be correct for what exists. Or, "The Broker sent the 1099 to the Individual and said they can't issue a 1099 to a Corp." is correct and they issue a Correction for $0, because you don't issue a 1099 to a Corp.

So, is the 1099 wrong? Or, is there no C Corp, yet?

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yeknod
Level 2

There is a C-Corp.  So, should the broker correct the 1099 to zero since it is a corp?

 

 

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sjrcpa
Level 15

Or, when the broker said they can't issue a 1099 to a corporation is it because legally only the individual can earn the commissions?

What is the answer to Lisa's comment? "(assuming real estate agents are allowed to be corporations"


ex-AllStar
yeknod
Level 2

FL Board said they can only be an LLC not a Corporation.   How do I pass the income thru the personal return?   It has already been claimed by the Corp.

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qbteachmt
Level 15

So, you are wanting different treatment for Fed vs State? LLC and S Corp?

Meanwhile, the C Corp doesn't seem to have had any revenue? Did it file with payroll, pay taxes, etc? The 1120 would be an error and is moot, but how much messier is this getting, as facts are revealed?

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yeknod
Level 2

Corp did file with payroll and pay taxes.

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abctax55
Level 15

Late to this party.... and maybe I missed it:

WHO were the checks made out to?  

AND who endorsed them?

WHAT bank account were the checks deposited in to?

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


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yeknod
Level 2

check were written to the TP and deposited into the Corp account   not sure how they were endorsed 

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George4Tacks
Level 15

This sounds like a Schedule C for the 1099 income and a shareholder contribution to the corporation from the shareholder. Out of curiosity, were shares ever issued by the corporation? Are there elected officers for this corporation? 

My suggestion is this yenkod not to end up being an ssa, kick this client down the road. 


ex-AllStar
yeknod
Level 2

Shares were issued

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ljr
Level 4

I thought commissions went to the individual and not to the corporation. and why a c-corp (another discussion I know. . . )

qbteachmt
Level 15

There are so many outstanding issues:

"and tried to register the Corp but received a letter basically saying that is not allowed."

For FL only?

"I have asked them to check and see if an S-Corp would be allowed"

Why is there even a Corporation? This requires payroll. Is there ongoing business that makes payroll reasonable?

"Get a copy of the commission agreement / broker contract and see who signed them."

Because legally, this is the business arrangement.

Your Taxpayer is responsible to understand contracts. Is the signature for the name of "Joe Doe, President of JD Corp" or "Joe Doe" as the individual?

For a FL S Corp Agent, the license gets transferred:

"Using your entity

One of the biggest mistakes many agents make is forming a PA or PL, but never changing their license with Florida Real Estate Commission (FREC). The problem is that commission checks will continue to come to your individual name and you wont reap the benefits of your business entity.

Here is how to properly use your entity:

  1. Obtain TAX ID Number
  2. File an election for the LLC to be taxed as an S-Corp (more information below).
  3. Change your name with FREC to the name of the LLC.
  4. Change your name with your broker to the name of the LLC to ensure checks are paid to the LLC and not your individual name.
  5. Open a bank account for the LLC and obtain credit or debit card.

Ultimately, you will be acting as a business rather than an employee. Why? If you don't act like a business, the IRS, nor any court, will treat you like a business."

So, what is the status of their license?

 

If your taxpayer could identify to resolve all the legal issues, and establish the specific parties in the relationship, that would be helpful.

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BobKamman
Level 15

Let's not be disingenous, we all know what is going on.  Audit rates for S corps and partnerships are both 0.22 percent — or, put another way, one in every 455 passthrough entities were examined in 2018. It is no wonder that the number of S corporations have increased by 38 percent from 2005 to 2018 (3.5 million in 2005 versus 4.85 million in 2018).

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qbteachmt
Level 15

The issues I've seen for RE include if the person intends to be a broker with an office, if they intend to buy and hold and manage, or Flip, RE, and not understanding what the various entity types provide, and especially how they differ.

But nothing stops a lawyer from getting fees for a bad recommendation to help you create a corporation for your "needs."

We see that on these forums often. Recently, the person who traded in the corporate car for a personal vehicle is my current favorite.

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BobKamman
Level 15

I'm not sure you're asking in the right place.  Try the "Putting Toothpaste Back In The Tube" message board.