Do S Corps Get 1099? Tax Insights for Solopreneurs

Do S Corps get 1099s? Generally, no. When you elect S Corp status, you shift from contractor to business owner, getting W-2s instead of 1099s. This strategic move lets you split income between salary and distributions, potentially saving thousands in self-employment tax. The flip side? You'll issue 1099s to contractors you hire, but with smart systems in place, compliance becomes automatic and your business gains enterprise-level credibility.

Every January, that 1099 form shows up like clockwork — your annual reminder of another year in the freelance game. But what if most of those 1099s could disappear entirely?

Here's the deal: S Corps generally don't receive 1099 forms — with a few specific exceptions we’ll cover. When you elect S Corp status, you transform from a contractor who gets 1099s to a business owner who pays yourself through W-2s. This isn't just a paperwork swap. It's a strategic move that fundamentally changes how you operate — and how much you keep.

With Lettuce, this entire transformation happens automatically — from S Corp formation to ongoing compliance management. No more wondering about tax forms or scrambling during tax season.

From 1099 Contractor to S Corp: How the Rules Change

Making the S Corp election means saying goodbye to 1099s and hello to W-2s. But what does that actually mean for your business?

First, let's decode the forms themselves.

Understanding Your Tax Forms

• 1099-NEC: This is the form contractors receive showing how much clients paid them. It triggers roughly 15.3% self-employment tax on your business profits — that's the tax that hits hard when you're a solopreneur without an S Corp.
• 1099-MISC: Another type of 1099 used for various payments like rent, royalties, and certain specific situations (like medical/legal payments to S Corps). Different from 1099-NEC but still means income reporting.
• W-2: This is the form employees receive showing wages and tax withholdings. As an S Corp owner, you'll get this from your own company.
• W-9: This is the form you fill out to give clients your tax info (name, address, and either your SSN or EIN).

Right now, clients pay you directly and send 1099s every January. You're hit with the full self-employment tax burden on all your income.

When you elect S Corp status, your business becomes its own entity with an EIN (Employer Identification Number). Clients pay your business, not you personally — and most 1099s stop coming, though certain exceptions like legal or medical payments may still apply.

Instead, you become an employee of your own S Corp, receiving a W-2 for your salary. Here's where the magic happens: you can split income between salary (taxed for payroll) and distributions (no self-employment tax).

This single change can save thousands annually once your business income hits around $80K per year. Your clients will need a new W-9 from your S Corp, but that's a small step for major tax optimization.

Why S Corps Generally Don't Receive 1099s: The Entity Advantage

When you elect S Corp status, the IRS recognizes your business-of-one as a separate entity — and that changes everything about how you get paid.

Here's what this entity advantage means for you:

• Corporate exemption - S Corps are exempt from receiving 1099-NEC forms for services, though there are exceptions, such as legal and medical payments. While sole proprietors must report every 1099 on their personal tax return, your S Corp operates like any other corporation — clients simply pay your business without the 1099 paperwork requirement.
• EIN-based payments - Your S Corp gets its own Employer Identification Number (EIN), which replaces your SSN on all business transactions. This means clients write checks to "Your Business LLC" using your EIN, not to you personally — protecting your SSN and creating a professional boundary.
• Higher earning potential - When clients see you operating as a corporation with an EIN, you're perceived differently. You're not "just a freelancer" anymore — you're a business entity that can justify higher rates, require net-30 payment terms, and negotiate contracts as an equal partner.
• Streamlined income - Instead of collecting and organizing 10+ different 1099s every tax season, all client payments flow into your S Corp's business account. One entity, one set of books, one streamlined system for all your income.

This isn't just a tax strategy — it's about giving your solo business the same professional structure that established companies use.

How Lettuce Helps: Lettuce automatically generates your new W-9 forms and provides ready-to-send client emails, making your transition seamless.

The Exception: When S Corps Do Get 1099s

While S Corps are generally exempt from receiving 1099s, the IRS requires them for specific payment types:

• Legal services - If your S Corp provides legal services, you'll still receive 1099-NEC forms from clients paying $600+.
• Medical/healthcare payments - Certain medical services trigger 1099-MISC requirements.
• Other rare exceptions - Fish purchases for resale, substitute payments in lieu of dividends (not typical for solopreneurs).

For most solopreneurs running S Corps in consulting, creative services, or tech, these exceptions won't apply. But if you're an attorney with an S Corp, you'll still collect those 1099s.

The W-2 Shift: How S Corps Pay Owner-Employees (And Save Big)

As an S Corp owner, you wear two hats: business owner and employee. This dual role unlocks the tax strategy that makes your S Corp so powerful.

• Draw a reasonable salary - Your S Corp pays you a regular salary through W-2 wages, just like any employer would. This satisfies IRS requirements while keeping your payroll tax burden manageable. For example, if you earn $100K, you might take a $50K salary.
• Take the rest as distributions - The remaining profits (that other $50K) come to you as owner distributions. Here's the magic: distributions aren't subject to the 15.3% self-employment tax that would hit every dollar as a sole proprietor.

Let’s understand the real savings with an example. Suppose your income is $100K income. As a sole prop, you'd pay $14,130 in self-employment tax. As an S Corp with $50K salary/$50K distributions, you'd pay $6,480 in payroll taxes. That's $7,650 staying in your pocket every single year. (Note: Actual savings vary by salary allocation and state taxes.)

This is how smart solopreneurs keep thousands more each year — using the exact compensation strategies that bigger companies have used for decades.

How Lettuce Helps: From quarterly payroll to W-2 generation to Form 941 filings and payroll management, Lettuce automates every compliance requirement while maintaining audit-ready documentation.

Curious if an S Corp is right for you?

Try the Lettuce Tax Calculator to see how much more you can take home each year.

See your savings

Managing 1099s for Contractors Your S Corp Hires

Here's the flip side: While your S Corp doesn't receive 1099s, you'll need to issue them to any contractor you pay $600+ during the year. Welcome to the other side of the tax form game.

What you're now responsible for:

• Track the $600 threshold - Every payment to freelancers and contractors counts toward their annual limit. Once they hit $600, they'll need a 1099-NEC from you.
• Collect W-9s upfront - Before cutting that first check, get their tax ID and business info. Chasing down W-9s in January is nobody's idea of fun.
• File by the deadline - 1099s must go to contractors by January 31st and to the IRS by January 31st (they moved up the deadline). Miss it, and you're looking at penalties.
• Keep clean records - Document who you paid, how much, when, and for what. If the IRS asks, you'll need to show your work.

For example, you hire a designer for $3,500 and a copywriter for $8,000. Both cross the $600 line, so you'll issue two 1099s. Simple enough — until you're juggling dozens of contractors.

How Lettuce Helps: Lettuce tracks every contractor payment automatically, flags when someone approaches $600, collects W-9s digitally, and generates all 1099s on time. No spreadsheets, no January panic, no penalties.

Do You Need to Send 1099s to Other S Corps?

Here's where it gets interesting: If you hire another S Corp for services, you generally DON'T need to send them a 1099 — even if you pay them over $600. S Corps are exempt from most 1099 reporting.

The big exception: Attorney S Corps still need 1099s for legal services. So if you pay your lawyer's S Corp $2,000, you'll still issue that 1099-NEC.

Pro tip: Always collect W-9s from vendors. When they mark "S Corporation," you'll know you can skip the 1099 (unless they're attorneys).

Frequently Asked Questions (FAQs) on 1099 for S Corps

You're not alone in wondering about these S Corp details — the questions below come up for every solopreneur making this smart business move.

Do S Corps receive 1099s?

No, S Corps generally don't receive 1099s because they're separate business entities that use their own EIN. The IRS exempts corporations (including S Corps) from most 1099 reporting requirements.

There are a few specific exceptions — like payments for legal services — but for typical consulting, creative, or tech services, your S Corp won't receive 1099s. That's one of the perks of the entity structure: clients simply pay your business without the 1099 paperwork you used to collect as a sole proprietor.

What if a client mistakenly sends a 1099 to my S Corp?

This actually signals your successful transition to a more sophisticated business structure. Simply reach out to request a corrected 1099 or ask them to void the incorrect one, since S Corps report income through different channels than sole proprietors. Your S Corp files Form 1120-S, putting you in control of a more strategic tax approach.

How do I update clients about my new EIN and entity status?

This is your moment to showcase your business evolution—send a professional update with your new W-9 and S Corp EIN. Clients see this as a sign of growth and increased professionalism, positioning you as the sophisticated business partner they want to work with. Proactive communication like this sets you apart and prevents any year-end confusion.

Do S Corps need to issue 1099s to vendors or contractors they hire?

Yes, when your S Corp pays $600 or more to contractors annually, you issue Form 1099-NEC just like any established business. This responsibility comes with the territory of running a real business entity, but modern systems automate the entire process—from tracking payments to filing deadlines—so you stay compliant without the administrative burden.

Automate Your S Corp Compliance — And Keep More of What You Earn

Transitioning to S Corp status can unlock thousands in tax savings and position your business-of-one with enterprise-level credibility. Your S Corp will need to handle various tax forms — from issuing 1099s to contractors for payments over $600 to managing W-2s, Form 941s, and Form 1120-S filings. The paperwork can feel overwhelming — but it doesn't have to be.

Your business deserves the same intelligent financial infrastructure that big companies use. With Lettuce, every form gets filed on time, every record stays organized, and your S Corp payroll runs like clockwork. Stop juggling spreadsheets and missing deadlines.

Transform your business-of-one with Lettuce's complete financial system and keep more of what you earn.