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Old 12-28-2011, 04:19 PM
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Client filed me as 1099 instead of corp-to-corp

Hi all,

I'm abysmally AWFUL at taxes, but have an accountant - so that *should* help.

In 2009, I created a new corp (Birdsong, Inc) and asked my client to change me to this corporation. I billed as this corporation, deposited all the checks into this account and paid myself as an employee with a W-2 at the end.

However, they apparently filed a 1099 with the government and now the IRS wants me to pay taxes against that. I'm not sure how to proceed - I think I'm needing a new tax accountant...he's kinda worried and I'm not sure why... :-(

Anyone gone through this?

Annie



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Old 12-29-2011, 01:00 PM
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“I billed as this corporation, deposited all the checks into this account and paid myself as an employee with a W-2 at the end.“----->As you said, if you are billing as 1099 or corp-to-corp and acting like an employee, you can get penalized big time by the IRS.
“However, they apparently filed a 1099 with the government and now the IRS wants me to pay taxes against that. I'm not sure how to proceed”------>In principle, the Form 1099-MISC is NOT REQUIRED if the work or services rendered is between corporations. 1099 forms are only required to be sent if the payments are being made to independent contractors who are not formally established as a corporation. That is what is meant by corp-to-corp. However, technically, a corp-to-corp arrangement also often receives a 1099 so it's more accurate to call "1099" self-employed or schedule-C , as you can see,sch C of 1040 is where one reports self employed earned income for which they did not receive a W2; if you work C2C and the customer then sends you a 1099, you could have big issues at tax time. When you work C2C, then your customer is not required to send you a 1099-Misc at tax season as some usually do.However, in the case of S corp, if the 1099 is in your name , NOT in your S-Corp name. No problems .You just give it to your tax preparer. Since you billed and were paid on your personal name, then you will have to pay taxes when you file your 1040. If it is in your personal name and you billed on your S corp name and were paid on your S-Corp name, you need to have them change the name of recepient on the 1099.
“- I think I'm needing a new tax accountant”---> I guess so.



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Old 12-29-2011, 01:21 PM
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Just to be clear - it IS okay to bill as C2C and then have myself as an employee of the corporation, right?? I deposited the checks into the business account and then I'm an employee...I pay myself, pay the taxes and then issue a W-2 and fill out a 1040.



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Old 12-29-2011, 01:25 PM
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“ it IS okay to bill as C2C and then have myself as an employee of the corporation, right?? I deposited the checks into the business account and then I'm an employee...I pay myself, pay the taxes and then issue a W-2 and fill out a 1040.”---->As said previously, if you are billing as 1099 or corp-to-corp and acting like an employee, you can get penalized big time by the IRS. I guess you need to contact the IRS for more accurate information in detail.



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Old 12-29-2011, 01:47 PM
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I guess I appreciate the heads up but, I thought the purpose of the corporation was to have employees - my company is the one that bills the client and they pay me as an employee.

How is that wrong?? <<sigh>> I'm not passing myself off as anything other than a corporation with (right now) one employee...



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Old 12-29-2011, 01:59 PM
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“ I guess I appreciate the heads up but, I thought the purpose of the corporation was to have employees - my company is the one that bills the client and they pay me as an employee. “How is that wrong?? <<sigh>> I'm not passing myself off as anything other than a corporation with (right now) one employee...”----> Correct, agreed;I mean , for example, assume that you can choose one of the three options (W-2, 1099, and Corp-to-Corp) that vary in complexity with W-2 being the simplest and setting up your own corporation the most complicated. Then you May, maybe for tax purposes, weigh the trade-offs of each approach and pick the one that fits your lifestyle best.



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Old 12-29-2011, 02:12 PM
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Also assume that as an S corporation that receives 1099's which represents their income for the year, the S corp received half of the 1099 forms in the corporation's tax identification number and the other half in the owner/EE’s social security number. Then does the SH/Owner( or EE) have to place the 1099 income in his SSN on a schedule C for his personal taxes, and then calculate a percentage for the expenses?if the income is reported on the 1099 form with personal SSN ;needless to say, the IRS expects that income to be reported on that individual personal tax return on Sch C/ Sch SE. If the income is not reported this way ,that will generate the letter from the IRS about missing income.Some issue another 1099 form to the S corporation - and deduct that as expenses - thus effectively shifting income to the S corporation. However, you may prorate expenses .



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