I am assisting a friend (sole proprietor) prepare her taxes. She used an individual who is incorprated and paid $20K for a project. Does she issue a 1099-misc for non-employee compensation and if not, how would she handle this expense?
Per the IRS instructions on 1099-Misc reporting instructions, "Payments for which a Form 1099-MISC is not required (generally) include payments to a corporation." Thus, per the Tax law you are not required to report any 1099-Misc income paid to an individual who is incorporated and no action is required by your friend.
That individual who receives the payments in the name of his or her corporation would report the income upon filing the corporation tax return! As for your friend, the expense would be reportable in a category called "Outside Services" on your friends Schedule C.