[msladyship]

We started an S Corp in 2010. Now it's time to issue 1099's to subcontractors. A couple of them have FEINs and I've heard they do not need to receive a 1099. Is that true? If so, can we send them anyway to keep records straight?
Also, does the amount we paid them still go under the category Contract Labor on the Schedule C? Many thanks!
Nancy

[AtlantaTaxExpert]

Nancy:

If you are conducting business as a sub-chapter S corporation, you will not file Schedule C. You need to file Form 1120S, probably a state-equivalent corporate return, and possibly a city corporate return (depending on WHERE you live), PLUS your personal returns as primary shareholders.

It is clear that you are attempting to file the tax return for your Subchapter S corporation, which is a BIG mistake. RUN, Don't WALK, to a tax professional who has EXPERIENCE filing these type of corporate returns, and let him/her handle it. If the tax professional is filing all of these forms, he/she can also handle the Form 1099 filing requirement as well, and he/she WILL know the rules associated with who does and does not have to get the Form 1099-MISC.

You may think I am being over-dramatic, but, trust me, I am NOT! The fines and penalties associated with the improper filing of corporate returns are something to have to experience to believe, and it is NOT a pleasant experience.

You probably end up paying between $500-to-$2,000 to the tax professional to prepare these returns (federal corporate return, state corporate return, possibly city corporate return, plus your personal returns as primary shareholders), but it will be worth it compared to headaches you will experience down the road when the IRS and the state tax authorities come looking for you when you file several years' worth of returns INCORRECTLY!