Owner wants to issue a 1099 MISC to himself in a C Corp

Forum|Forum|6 years ago
December 7, 2019
3 replies
25 views

My client is the only officer of a C corp and his former accountant usually reports withdrawals as "contract labor" on 1120, then report it as income on line 12 of his 1040. Is it better to treat his withdrawals as dividends and issue a 1099 DIV for him as opposed to a 1099 MISC as he has been doing it?

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Best answer by Accountant-Man

And if he takes money out of the profits they're called "dividends."

Accountant-ManAnswer

Level 13

And if he takes money out of the profits they're called "dividends."

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ddh2020Author

Level 3

Do companies usually do this? If i go the 1099MISC route, would that raise a red flag with the IRS?

IRonMaN

Level 15

Good thing his former accountant is his former accountant. Now that you are in charge you can get it right. If he is doing work for the corp he gets paid wages. Wages get reported on W-2s. W-2s mean payroll taxes and he needs to start paying payroll taxes.

Slava Ukraini!

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ddh2020Author

Level 3

He's not really an employee to the company since he perfoms work very sporadically. I was thinking about issuing a 1099DIv instead that way he is not including this as expense on the corp return and pays tax on this income on his personal. Could that be an option?

thank you

qbteachmt

Level 15

This is pretty funny, if you read what you stated, again: "He's not really an employee to the company since he perfoms work very sporadically."

Work = work. You just described an employee.

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