1099-MISC - Illegal?

[AuditorTurnedGood]

Here is an odd question I got from a new client yesterday.

He is in the construction trade. His previous accountant had told him it was illegal for him to 1099 anyone who was not operating as an LLC.

I know in MN now we have a requirement to withhold 2% of the 1099 amount and remit to the state as income tax withholding on contractors, but can anyone else think of what the previous guy was thinking? He mentioned something about a $10,000 fine. I told him paying someone over $600 in a year and not issuing a 1099 would be an even bigger issue.

I tried to give the other guy the benefit of the doubt, but I think the words "I don't know on what planet he was practicing" may have escaped my mouth. Thanks all!

ATG

[BOB W]

Here is an odd question I got from a new client yesterday.

He is in the construction trade. His previous accountant had told him it was illegal for him to 1099 anyone who was not operating as an LLC.

I know in MN now we have a requirement to withhold 2% of the 1099 amount and remit to the state as income tax withholding on contractors, but can anyone else think of what the previous guy was thinking? He mentioned something about a $10,000 fine. I told him paying someone over $600 in a year and not issuing a 1099 would be an even bigger issue.

I tried to give the other guy the benefit of the doubt, but I think the words "I don't know on what planet he was practicing" may have escaped my mouth. Thanks all!

ATG

That is such an outlandish statement from so many point of views. EX: An LLC can be a Corporation and corporations do not get 1099s. You know the rules, so just blow off what your client is saying and do what is right, as usual.