Is 1099 a Tax Deduction for a Company?

Your small company must issue a 1099 for several types of payments you make. Whenever you distribute money, the Internal Revenue Service allows you to count the expense as a business write-off. You can reduce your taxable business income by the amount of your expenses. Track part of those expenses by tracking the amounts you list on 1099s that you give to people you pay for deductible services.

Whenever you hire independent contractors for special projects, you must track the wages you pay them and issue a 1099 form. Those wages qualify as expenses for your business, and you may deduct them from your taxable income. You will not have any payroll taxes for a 1099-MISC, because you do not treat an independent contractor like an employee.

If you pay any dividends or distributions to shareholders or company officers, you must issue a 1099-DIV. You can deduct these payments as business expenses. The person who receives the dividends or distributions will pay income tax on them.

If you pay interest on money you have borrowed from anyone but a corporation, you must report that interest on Form 1099-INT. Your interest payments are deductible. Current law does not require you to issue a 1099 to a corporation.

When someone owes you money and they do not pay it, you may cancel that debt and write it off as a loss for your business. You must issue a 1099-C to the person or company whose debt you forgave. You can write off all of the principal and the amount of interest owed at the time you forgave the debt.

If your small business engages in real estate transactions and distributes rental income or capital gains, you must issue a 1099-S. Those distributions count as business expenses. This situation arises if you own rental properties and have partners. Each partner would receive a 1099-S showing what portion of proceeds went to that individual. The business itself would show the payments to partners as an expense.