1099 Issued to Partner from Partnership

[peggysioux]

New client is a member of an LLC taxed as a partner and was issued a 1099 from the LLC. Are there certain situations that would call for a 1099 to be issued to a member rather than being included in K-1?

Peggy Sioux

[Roland Slugg]

It would have been helpful if you had said which type of 1099 it is.

A p'ship can issue a 1099-INT to a partner if that partner loans the p'ship funds in his capacity as a lender, not a partner, and the p'ship pays interest on that loan.

A p'ship should not issue a 1099-MISC to a partner for services. Instead, such payments should be treated as "guaranteed payments" and reported on the appropriate line of that partner's K-1.

It's conceivable, I suppose, that a p'ship could issue a 1099-R form to a retired partner, but I have never seen one. 1099-R forms are always issued by plan trustees and administrators. As for the various other kinds of 1099s, I can't think of any that a p'ship might legitimately issue to a partner.

[peggysioux]

1099 Issued to Partner from Partnership

It would have been helpful if you had said which type of 1099 it is.

A p'ship can issue a 1099-INT to a partner if that partner loans the p'ship funds in his capacity as a lender, not a partner, and the p'ship pays interest on that loan.

A p'ship should not issue a 1099-MISC to a partner for services. Instead, such payments should be treated as "guaranteed payments" and reported on the appropriate line of that partner's K-1.

It's conceivable, I suppose, that a p'ship could issue a 1099-R form to a retired partner, but I have never seen one. 1099-R forms are always issued by plan trustees and administrators. As for the various other kinds of 1099s, I can't think of any that a p'ship might legitimately issue to a partner.

My apologies...should have supplied more detailed info. The 1099 is a 1099-MISC and proceeds in box 7. Taxpayer said 2016 was the first year that partnership disbursed funds and they issued a 1099-Misc.

Peggy Sioux

[spanel]

My apologies...should have supplied more detailed info. The 1099 is a 1099-MISC and proceeds in box 7. Taxpayer said 2016 was the first year that partnership disbursed funds and they issued a 1099-Misc.

Peggy Sioux

Sounds like someone doesn't know how to prepare 1065's. 1099's don't need issued, K1's do. Also if a partner took more than his percentage of the profits, then its a guaranteed payment on the K1.

Chris

[peggysioux]

1099-Misc Issued to Shareholder of S-Corp

Just received the K-1 and realized 1099-Misc was issued to shareholder of an S-Corp and not partner of a partnership. K-1 shows a distribution of $5000 but LLC also issued 1099-Misc to shareholder for $5000. I am baffled why tax preparer would issue a 1099-Misc and show box 7 compensation for a distribution. Any special circumstances that I am not aware that would cause this situation? How to handle if tax preparer does not want to correct?

Peggy Sioux

[spanel]

Just received the K-1 and realized 1099-Misc was issued to shareholder of an S-Corp and not partner of a partnership. K-1 shows a distribution of $5000 but LLC also issued 1099-Misc to shareholder for $5000. I am baffled why tax preparer would issue a 1099-Misc and show box 7 compensation for a distribution. Any special circumstances that I am not aware that would cause this situation? How to handle if tax preparer does not want to correct?

Peggy Sioux

Did the partner work for the corp? Perhaps that should have been a W2? What % of ownership is this partner?

Chris

[peggysioux]

1099-Misc Issued to Shareholder of S-Corp

Did the partner work for the corp? Perhaps that should have been a W2? What % of ownership is this partner?

Chris

The LLC taxed as a corporation is for rental property. Property is located out of state and he did take a trip to rental property during 2016 for which he gave receipts for deductions to apply against 1099-Misc. So your thoughts are that taxpayer could have worked for corporation and corporation issued a 1099-misc rather than W-2 and also gave a distribution for the same amount? I have a call into taxpayer to see if he received a distribution of $5000 and received an additional $5000 for work-related issues.

Peggy Sioux

[peggysioux]

1099-Misc Issued to Shareholder of S-Corp

Forgot to answer your question - shareholder has 33.3% ownership.

Peggy Sioux

[kathyc2]

Forgot to answer your question - shareholder has 33.3% ownership.

Peggy Sioux

Unless your client has a very good understanding of what happened, I would ask him to contact the firm that prepared the 1120S and give authorization for them to discuss the K-1 and 1099 with you.