Do I Need to Send a 1099 to an LLC Taxed as an S Corp?

In most cases, you do not need to send a 1099 to an LLC that is taxed as an S corporation. The IRS exempts payments to corporations from Form 1099-NEC reporting, and an LLC that has elected S corp status is treated as a corporation for federal tax purposes. The exemption has a few important carve-outs, and it only protects you if you have a completed Form W-9 on file confirming the vendor’s classification.

Confirm the S Corp Status With a Form W-9

You cannot tell an LLC’s federal tax classification from its name, its state filings, or the “LLC” in its title. An LLC can be taxed as a sole proprietorship, a partnership, a C corporation, or an S corporation depending on what election, if any, its owners made with the IRS. The only reliable way to know is to collect a Form W-9 before you make the first payment.¹

On the current W-9 (revised March 2024), federal tax classification appears on line 3a. If the vendor checks “S Corporation” outright, you have your answer and can skip the 1099-NEC. When the vendor checks the “Limited liability company” box instead, they are also required to enter a tax classification code in the space provided: C for C corporation, S for S corporation, or P for partnership. An LLC that enters “S” is telling you it has an S corp election in place and falls under the corporate exemption.²

An LLC that enters “P” on that line, or a vendor who checks “Individual/sole proprietor,” is not exempt. Those payees get a 1099-NEC once you have paid them $600 or more for services in the year.³

Why the Exemption Exists

The general rule is that any business paying a vendor $600 or more for services in the course of a trade or business has to report the payment on Form 1099-NEC.⁴ The IRS carves out corporations from that rule: payments to C corps and S corps are generally not reportable.⁵

An LLC that has made a valid S corp election is treated as a corporation for federal tax purposes and reports its own income on Form 1120-S.⁶ Number of members, state of formation, and business name have no bearing on the exemption; the election does.

When You Still Have to Send a 1099 to an S Corp

The corporate exemption is broad but not absolute. A few categories of payment must be reported no matter how the payee is organized. For most businesses, two of these come up regularly:

Attorney fees. Any payment of $600 or more to a law firm or attorney for legal services goes on Form 1099-NEC, even if the firm is an S corporation. Gross proceeds paid to an attorney in connection with legal services, such as settlement payments, are reported separately on Form 1099-MISC, box 10.⁴
Medical and health care payments. Payments of $600 or more to a physician or other health care provider go on Form 1099-MISC, box 6, even when the provider operates as a corporation or professional corporation. Payments to tax-exempt hospitals and pharmacies for prescriptions are excluded.⁴
Cash payments for fish. Reported on Form 1099-MISC regardless of the payee’s corporate status.⁵

The full list of override categories also includes substitute payments in lieu of dividends, federal executive agency payments for services, and certain broker transactions.⁵ For most small businesses paying an LLC S corp for ordinary services, attorney fees and medical payments are the two to watch.

What If the LLC Isn’t Actually an S Corp

An LLC only gets the corporate exemption if it has affirmatively elected S corp treatment with the IRS, typically by filing Form 2553.⁷ Without that election, a single-member LLC is treated as a disregarded entity (essentially a sole proprietorship) and a multi-member LLC is treated as a partnership. Both classifications require 1099-NEC reporting once the $600 threshold is met.

The rest of the picture, by LLC tax classification:

Disregarded single-member LLC: issue a 1099-NEC if you paid $600 or more for services.
LLC taxed as a partnership: issue a 1099-NEC if you paid $600 or more for services.
LLC taxed as a C corporation: generally exempt, same as an S corp, with the same override categories.
LLC taxed as an S corporation: generally exempt, subject to the exceptions above.

Payments for merchandise, freight, or storage do not trigger 1099-NEC reporting regardless of how the payee is organized. The $600 threshold applies to services (reported on 1099-NEC) and to certain other income like rent or royalties (reported on 1099-MISC).⁸

If the Vendor Won’t Return a W-9

You cannot fall back on assumptions when a vendor refuses to send a W-9. If a vendor fails to provide a taxpayer identification number, you are required to begin backup withholding at 24% on all future payments to that vendor and remit those amounts to the IRS.⁹ The same obligation applies if the IRS notifies you that the TIN the vendor provided does not match its records.

Backup withholding stops once the vendor supplies a valid W-9. For the period in between, the payer is personally on the hook if the withholding is not done.⁹

What to Do If You Sent a 1099 by Mistake

Sending a 1099-NEC to a vendor that turns out to be an S corp is not itself penalized, but it can create matching-notice headaches for the recipient. You can file a correction:

If you filed on paper, follow Part H of the General Instructions for Certain Information Returns. Do not check the “VOID” box on the correction form; that tells the IRS to ignore the filing entirely.⁴
If you filed electronically through the FIRE system, follow the procedures in Publication 1220.
If you filed through the IRIS portal, follow the procedures in Publication 5717.

Corrections filed promptly are not penalized. If the original return was on time and you are only fixing the classification, penalties generally do not apply.

Two Adjacent Rules Worth Knowing

If you paid the vendor through a third-party platform like PayPal or Venmo, the payment processor handles reporting on Form 1099-K when the payee crosses $20,000 in payments and 200 transactions in a calendar year.¹⁰ That does not change your entity-based analysis, but you should avoid double-reporting a payment the processor has already captured.

State filing is separate. The federal corporate exemption does not automatically carry over to every state, and many states impose their own 1099 filing rules. Check with your state tax agency; where a state participates in the Combined Federal/State Filing Program, the state information boxes on Form 1099-NEC allow reporting alongside the federal filing.⁴

1
Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
2
Internal Revenue Service. Form W-9 (Rev. March 2024)
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Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024)
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
5
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
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Internal Revenue Service. About Form 1120-S, U.S. Income Tax Return for an S Corporation
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Internal Revenue Service. About Form 2553, Election by a Small Business Corporation
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Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
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Internal Revenue Service. Backup Withholding
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Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill