Does Rent Paid to a Corporation Qualify for a 1099?
When it comes to preparations for tax season, it is often difficult to know which payments need to be reported to the IRS and for which vendors you need to prepare Form 1099-MISC. Form 1099 includes rent payments that are made for the use of office space. While Box 1 on Form 1099-MISC is designated for rent payments, the IRS Code allows exemptions for some entities so that preparing a 1099 form for them is not necessary.
According to the IRS publication, "2018 Instructions for Form 1099-MISC," if you make rental payments to a C corporation or an S corporation, you do not need to issue it a Form 1099. In general, corporations do not need to receive 1099s. Additionally, if you make a payment to a limited liability company (LLC) that is treated either as a C-corporation or an S-corporation for tax purposes, you also do not need to issue a 1099 form. However, a single member LLC, sole proprietorship, partnership or unincorporated contractor should be given a 1099-MISC indicating how much rent you paid the company during the year.
With so many tax classification options for an LLC and with trade names getting into the mix, it may be difficult for you to know if you are dealing with a corporation or an entity electing to be treated as a corporation for tax purposes. The best way to ensure accurate reporting is to request a W-9 form from the vendor in question.
The W-9 is an official request for a taxpayer identification number, but it also tells you the company's tax classification. The basic form asks for the company's name, a business name if it operates or markets under a name different from the one on its tax documents, and its tax identification number (TIN). The TIN could be either a business EIN or an individual's Social Security number. Line 3 of the form asks for the company's federal tax classification, such as a corporation, sole proprietor, partnership or LLC. If the company checks the box as an LLC, it must indicate how the company has elected to be viewed for tax purposes. This form is not filed with the IRS. It is mainly for payers to know what type of entity they are paying.
You may be paying your rent to a real estate agent who then turns the funds over to the owner. You do not need to know the classification of the building owner or issue a 1099 form to the owner. You also are not required to provide a 1099 form to the rental agent, as that person is not receiving the income but only acting as an agent and passing the income to the owner.