When you have LLC and requested to be taxed as an S corporation, or registered your business as an S corporation, you are required to file form 1120S for your S Corp tax return.
There is not a specific row to enter 1099-Misc. on 1120S or to deduct independent contractors’ fees.
As a corporation IRS expects your business to have officers and employees. Therefore, there are rows for officer’s compensation (Line 7) and employees’ wages (Line 8) on Form 1120S.
Where to report 1099-Misc on Form 1120S?
There are 3 ways to record independent contractors’ payments or commissions on your S Corp Tax Return:
- Repair and Maintenance fees—Line 9: If you hire a professional to fix something at your business place, you would be charged for the materials unless you provide them and for the contractor’s time. The payment related to the material and labor would be recorded here.
- Labor on Line 3 of Form 1125A: If you are in the business to manufacture a good for resale, your employees’ labor or contractors labor cost related to the goods produced would be recorded here and you can only deduct the labor cost as you sell your goods.
- Other Deductions – Line 19: If these fees do not fit any of these categories, you could record your payments to contractors on line 19 on Form 1120 S – Other Deductions. You add an attachment and narrate contactors’ 1099 total amount or be more specific and group them by profession. For instance, deduct Legal and Professional Fees incurred on line 19: If you hired a bookkeeper to keep your book as a contractor not an employee, the payment would go here as professional fees. Also, payment to tax professional would be deducted on Line 19. Lawyer fee would go here as well unless they are on your payroll.
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