Do S Corps Get 1099s? Rules & Exceptions Explained

Running your business as an S corporation usually indicates that you wear many hats. You might understand the benefits of pass-through taxation while embracing reasonable salary strategies, but few topics trip up growing companies faster than the rules surrounding S corps and Internal Revenue Service (IRS) Form 1099. There are two primary schools of thought surrounding this issue: 

  • Some business owners assume S corps never deal with 1099s

  • Other owners file every business tax form they can out of an abundance of caution

Both approaches invite errors and, in extreme cases, penalties and additional scrutiny from the IRS, which can be disruptive. The truth sits comfortably in between: S corps are usually exempt from receiving 1099s, yet they must issue them just like any other business. Several critical exceptions apply, which we detail in this article.

Understanding the line between exemption and obligation is essential for stress‑free tax management and healthy vendor relationships throughout the tax year. 

Key Highlights

  • S corps are exempt from receiving most Form 1099s due to the corporate exemption, but the rule has three major exceptions.

  • Payments for legal services, medical and healthcare services, and most card or third-party network transactions reported on Form 1099-K can trigger a 1099 to an S corp.

  • Every S corporation still has a duty to issue Forms 1099-NEC, Nonemployee Compensation, and 1099‑MISC, Miscellaneous Information, to qualifying vendors, self-employed freelancers, landlords, and independent contractors paid $600 or more in a calendar year.

  • Collecting IRS Form W-9, Request for Taxpayer Identification Number and Certification, from each vendor before payment is the cornerstone of year‑round 1099 compliance.

  • Failing to file during tax season or filing late can cost up to $310 per form in penalties, with steeper fines for intentional disregard.

  • Full-service bookkeeping paired with expert CPA guidance simplifies W‑9 management, payment tracking, and mandatory e‑filing requirements

Why S Corps Generally Don’t Receive 1099s

There is a fundamental reason for the 1099 exemption for S corporations.

Understanding the "corporate exemption"

The IRS requires payers to file Form 1099‑NEC or 1099‑MISC for most business payments of $600 or more unless the recipient operates as a corporation.

Because an S corporation is, at its core, a corporation, payments to your S corp fall under this corporate exemption. The IRS already gathers the same income data through the annual filing of Form 1120‑S, U.S. Income Tax Return for an S Corporation, so a redundant 1099 would offer no additional insight , which is why the exemption exists. 

The pass‑through nature of S corporations

Although an S corp files its own return, the income ultimately “passes through” to shareholders, who then report it on their individual Schedule K‑1, avoiding double taxation that C corps are subject to.

Choosing an S corp business structure – often with the help of a trusted accounting professional – can optimize self‑employment taxes and streamline reporting. The takeaway: once you elect S corp status, you typically stop receiving 1099s for your own revenue streams, but you may have to issue them for work or services performed.

The role of Form W‑9 for verification

Vendors do not need a crystal ball to know whether you operate as a C corporation or an S corporation. Form W‑9 tells them. By checking the “S corporation” box and supplying your Employer Identification Number (EIN), which acts as a Social Security number for your small business, you put payers on notice that a 1099 is not required – unless one of the exceptions below applies.

On the flip side, you should collect a W‑9 from every vendor before payment to verify their entity status so that you can put your crystal ball in storage! Affordable, full-service bookkeeping from 1-800Accountant can automate W‑9 requests and store the materials so you won't have to scramble in January (when 1099s are typically issued).

Exceptions: When an S Corp Must Receive a 1099

There are specific situations where the general exemption does not apply, requiring payers to issue a 1099 to an S corporation for tax purposes.

The legal services exception

Payments of $600 or more for legal services are always reported on IRS Form 1099‑NEC – even if the law firm or solo attorney is incorporated. The following payments qualify: 

  • Retainer deposits

  • Settlement fees

  • General counsel arrangements

If your S corporation provides legal services, expect clients to send you a 1099‑NEC and reconcile that income against your books.

The medical and healthcare payments exception

Medical and healthcare payments of $600 or more belong on IRS Form 1099‑MISC, line 6, regardless of the provider’s entity type. Typically, if your business is structured as an S corp and hits the income threshold, you will receive IRS Form 1099-MISC, including: 

  • Dentists

  • Therapists

  • Telehealth groups

Healthcare-focused businesses often juggle insurance reimbursements, patient payments, and third-party vendors, requiring time-consuming recordkeeping to remain up to date. Take back your time and leave the complexity behind with 1-800Accountant's full-service bookkeeping solution for your healthcare-focused operations.

Form 1099‑K for e‑commerce and card payments

If you accept credit cards, PayPal, or similar platforms, you may receive IRS Form 1099‑K from your payment processor. The form reports gross receipts processed through its network.

While sales reporting thresholds have been gradually reduced, aiming to be triggered by $600 or more in sales in 2026, the passage of the One Big Beautiful Bill Act has eliminated previous reporting thresholds. Now, most platforms must issue a 1099‑K once a seller exceeds $20,000 in sales and 200 transactions. 

An integrated accounting system is critical and will help reconcile 1099‑K totals, including: 

  • Actual sales

  • Refunds

  • Fees

S Corp’s Duty to Issue 1099s

Ignoring outbound 1099 obligations is one of the fastest ways to attract unwanted IRS attention. Your S corporation is a payer in many everyday scenarios, and the same $600 threshold applies.

Reporting payments to independent contractors on Form 1099‑NEC

If you paid an individual sole proprietor, partnership, or limited liability company (LLC) $600 or more for services during the calendar year, you must furnish IRS Form 1099‑NEC by January 31 of the following year. Correct worker tax classification is vital.

Confusing an employee (who needs a W‑2) with a contractor (who needs a 1099‑NEC) can trigger payroll tax audits and back wage payments. Full‑service payroll from 1-800Accountant integrates contractor and employee records, reducing classification risk.

Issuing Form 1099‑MISC for other payments

Form 1099‑MISC still covers certain non‑service payments that fall outside normal service fees, including: 

  • Rent

  • Prizes and awards

  • Royalties

  • Fishing boat proceeds

  • Attorney payments

Landlords who rent real estate, office space, or vehicle rentals, for example, are common IRS 1099‑MISC recipients. Real estate investors who operate through an S corp can outsource the entire filing process to property‑management‑friendly accounting solutions, such as those offered by 1-800Accountant. 

Form 1099 requirements for S corps from collection to filing

Since 2024, businesses that file 10 or more information returns of any type must e-file. Manual paper filing is no longer an option for most S corps. A compliant workflow looks like this:

  1. Collect W‑9s during vendor onboarding.

  2. Track payments in real time using automated bookkeeping software.

  3. Review thresholds in early January and verify data.

  4. E‑file 1099s through an authorized transmitter or a full‑service provider by January 31 (recipient copy) and the March e‑file deadline.

Maintaining compliance for your S corporation is a year-round process. 

IRS Penalties for 1099 Mismanagement

There is a financial risk for non-compliance. 

  • Penalties start at $60 per form if you file within 30 days of the deadline

  • These penalties climb to $310 per form after August 1

  • Penalties can reach $630 per form for willful neglect

The fines stack up quickly when multiple vendors are involved. In extreme cases, the IRS may assess separate penalties for failure to furnish copies to recipients.

Streamline Your S Corp’s Tax Compliance With 1‑800Accountant

S corps enjoy the peace of mind that comes with the corporate exemption, yet 1099 responsibilities still loom large. Building a proactive system transforms 1099 compliance from a frantic January task into a predictable process, covering: 

  • W‑9 collection

  • Threshold tracking

  • Accurate, on-time e‑filing 

1‑800Accountant, America's leading virtual accounting firm, pairs dedicated CPAs, EAs, bookkeepers, and tax professionals with cutting‑edge software so you never miss a filing deadline. Accurate books underpin every 1099, and our experts classify each payment correctly long before the IRS looks at your return. Whether you need help reconciling 1099‑K totals from multiple platforms or need the professional expertise to handle all contractor filings, we have you covered.

Ready to trade spreadsheets for certainty with affordable, tax-deductible support? Schedule a free consultation, usually 30 minutes or less, and discover how effortless year‑round compliance can be with experts on your side. 

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.