Does a PLLC Require a 1099?
State laws determine the requirements to register as a professional limited liability company, or PLLC, but most generally require all members of the company to be professionals licensed by a state board, such as lawyers, accountants or physical therapists. While loosely aligned, PLLCs provide their members protection from all but professional malpractice liability, and are largely treated as if they’re organized companies rather than individuals for revenue and tax purposes.
To ensure that all independent contractors pay their share of taxes, the Internal Revenue Service requires that companies file a 1099-MISC that details expenditure amounts made to all independent contractors who earn more than $600. Companies usually aren’t required to issue 1099s to corporate entities such as PLLCs that provide professional services to them, just as they’re not required to file 1099-MISC forms for corporations. In most circumstances, 1099-MISC are filed only when a company pays an individual or a partnership.
A company may need to file a 1099-MISC for funds it pays a PLLC if it meets one of the IRS requirements to receive a form. Any amount of money paid to attorneys organized as PLLC – or any other corporate structure – must be reported to the IRS on a 1099-MISC in box 14. Cash settlements made to claimants to resolve a lawsuit or other issue don’t need to be reported, as the claimant’s attorney’s fees are taken from that settlement, and paid by the claimant, not the defendant. Additionally, medical expenses paid to a PLLC must be reported with a 1099.
As companies that contract non-legal professional services with PLLCs aren’t required to submit 1099-MISC forms that track their expenditures, those payments can be accounted for as with any other billable service rendered to the company, and accounted for as a normal operational expense. The PLLC’s expense is paid as a straightforward expense, as billed by the PLLC, and the PLLC must report its income in the normal course of filing its taxes.
The IRS requires companies to mail 1099s by Jan. 31 and assesses a $50 fine per form that is filed late. Owners of a PLLC that provides services that qualify for 1099-MISC treatment who don’t receive a form from their clients can file their return without the form. Tax laws require PLLCs and other entities to report all income regardless of whether it’s tracked by a 1099, when filing their tax returns. PLLCs with a missing 1099 should merely include the income on their return as the service was billed.