Understanding tax obligations can be a complex task for businesses, particularly regarding 1099 forms, which report various types of income other than wages, salaries, and tips. For C Corporations (C Corps), the question often arises: do they receive 1099 forms?
The answer depends on specific exceptions and filing requirements. This discussion will clarify scenarios where C Corps might need to file or receive 1099s, how to verify corporate status, and the penalties for noncompliance.
General 1099 Policy for C Corps
C Corporations are generally exempt from receiving 1099 forms. IRS rules state that payments to corporations are usually not reportable on Form 1099-NEC, with specific exceptions such as payments for legal services and medical or healthcare payments. 1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Apr. 2025)
However, there are exceptions. For example, payments to attorneys for services of $600 or more in a calendar year must be reported on Form 1099-NEC, even if the law firm is a corporation. In addition, certain legal settlement “gross proceeds” paid to attorneys are reported on Form 1099-MISC. This underscores the need for businesses to understand the nuances of tax regulations and maintain accurate transaction records with C Corps.
Exceptions That Require Filing
Despite their general exemption, several exceptions require filing 1099 forms for payments to C Corporations. One key exception involves payments for medical and healthcare services. Payments exceeding $600 annually are reported on Form 1099-MISC (box 6).
Another significant exception includes payments to attorneys. Regardless of whether a law firm operates as a C Corporation, businesses must issue Form 1099-NEC (box 1) for attorneys’ fees of $600 or more, and report certain gross proceeds to attorneys on Form 1099-MISC (box 10).
Other exceptions include cash payments for the purchase of fish for resale and certain payments by federal executive agencies for services. These targeted requirements aim to address potential discrepancies in income reporting in specific industries.
Verifying Corporate Status
Correctly classifying a business entity is essential when determining whether to issue a 1099 form. Businesses should request a completed Form W-9 from vendors to obtain their taxpayer identification number (TIN) and tax classification. 2Internal Revenue Service. Instructions for the Requester of Form W‑9 (Mar. 2024)
The IRS does not provide a public database to verify a business’s federal tax classification. State-level corporate registries can help confirm incorporation status and entity type, complementing what the vendor certifies on Form W-9.
Potential Penalties for Noncompliance
For returns required to be filed in 2025, the penalty for failing to file correct information returns (for example, Forms 1099) is $60 per form if corrected within 30 days, $130 per form if corrected after 30 days but by August 1, and $330 per form if corrected after August 1. Annual caps for small filers (average annual gross receipts of $5 million or less) are $232,500, $664,500, and $1,329,000, respectively; for larger filers, the caps are $664,500, $1,993,500, and $3,987,000. Intentional disregard carries at least a $680 penalty per return with no maximum. 3Internal Revenue Service. Internal Revenue Bulletin 2023‑48 (Inflation Adjustments for 2025)