1099's

[sdtaxman]

Does anyone understand the rules of reporting 1099's to attorneys? I am struggeling, it sounds like we need to issue a 1099 to all attorneys for all payments related to trade or business as either non employee compensation or gross proceeds paid to attorneys. Examlpe, client pays an attorney $125 to review a lease agreement or talk about a collection issue do they need to prepare a 1099 to the attorney if he is a sole proprietor? A corporation?

Thank you,

[DTS]

1099

It's so weird you posted about this! I had a call today about this very thing.

It appears to me that anyone needs to issue a 1099, box 14 to an attorney for any amount, regardless of s/p or corporation. No exemption for them being a corp.

Anyone to confirm this?

Dennis

[John of PA]

Unclear in TTB

While this section is easy to find in TTB Deluxe, without going to the index. Tab 23 Payroll, then the table of contents at the tab list 1099 MISC on page 23-8. There is a section at the bottom on 1099's to attorneys. I find this confusing though. Your question about the entity is not answered. I do know that in 2006 the law was changed and payments to attorneys only have to be made if over $ 600. Before 2006 all payments had to be reported no matter how small. My guess is that if a payment is made to an LLC or a Corp, it is not being made to an attorney and does not have to be reported.

[KJ Judd]

Attorneys are the exception to the no filing if a corporation rule. You need to 1099 a law firm/attorney for all payments. (The large law firm I used to work for would get many large boxes full of 1099s this time of year.)

The difference between the two Boxes is if what the payments are for. If you just paid the attorney for legal fees, it's box 7 - nonemployee compensation. If you paid him for legal fees plus a retainer or settlement and you can't separate the amounts, you are to put the whole lump sum in box 14. (The law firm is then responsible for issuing any 1099s for amounts paid from the settlement.)

However, the no reporting unless $600 or more paid in the calendar year still applies.

[JG EA]

Thanks for the reminder. I look at cost of goods and contract labor but forgot this year to look in legal. (Maybe I would have remembered when sending one to myself "and professional".)

[Ken]

1099

I started to post something and then I re-read the post. I guess you arent talking about a person who hires an attorney to divorce his wife or some such thing. I think I would be safe in saying that no one files a 1099 in those cases.

[Bees Knees]

While this section is easy to find in TTB Deluxe, without going to the index. Tab 23 Payroll, then the table of contents at the tab list 1099 MISC on page 23-8. There is a section at the bottom on 1099's to attorneys. I find this confusing though. Your question about the entity is not answered. I do know that in 2006 the law was changed and payments to attorneys only have to be made if over $ 600. Before 2006 all payments had to be reported no matter how small. My guess is that if a payment is made to an LLC or a Corp, it is not being made to an attorney and does not have to be reported.

You didn't read it in context. The attorney issue is tacked on at the end of the discussion on whether you report payments to corporations on a 1099-MISC. The general rule is no, with the following exceptions listed in TTB:

Payments reportable to corporations. The following
payments made to corporations generally must be
reported on Form 1099-MISC:
• Medical and health care payments.
• Fish purchases for cash.
• Attorneys’ fees.
• Gross proceeds paid to an attorney.
• Substitute payments in lieu of dividends or tax-exempt interest.
• Payments by a federal executive agency for services.

Since Attorneys' fees are included in that list, that means you report payments to Attorneys on the 1099, even if the Attorney is conducting business as a corporation. The rest of the information that is Attorney specific doesn't change that fact, unless the Attorney is your employee (in which case the money is reported on a W-2 rather than a 1099)

[John of PA]

Suggestion for TTB

Thank you BN. If I may make a suggestion, there should be a comment in the section "Payments to attorneys (on page 23-8)" that reads "also see "Payments reportable to corporations" above.