The Internal Revenue Code (IRC) provides that payments made to corporations do not have to be reported on an information return like Form 1099-MISC, subject to certain exceptions. A payer may treat a corporation as an exempt recipient if it satisfies one of the three indicators outlined by IRC. These include receiving a completed Form W-9 with an EIN and a statement from the payee, having a domestic corporate resolution or similar document clearly indicating corporate status on file, or identifying the corporation through the name that contains an unambiguous expression of corporate status.
There are two ways in practice that accounting departments comply with these indicators. The first step is to look for Inc. or similar terminology on a company’s website, invoice, contract, or other documents. The second step is to go to the Secretary of State’s website, complete a business search for the company name, and download the Certificate of Incorporation for companies that are a corporation. Please note that foreign corporations are outside the scope of this discussion.
- A Form W-9 is received which includes an EIN and a statement from the payee that it is a domestic corporation.
- You have on file a domestic corporate resolution or similar document clearly indicating corporate status.
- The name of the corporation contains an unambiguous expression of corporate status that is Incorporated, Inc., Corporation, Corp., P.C., (but not Company or Co.) or contains the term insurance company, indemnity company, reinsurance company, or assurance company.
There are two ways in practice that accounting departments comply with these indicators so they are not required to obtain Form W-9. The first step is to look for Inc. or similar terminology on a company’s website, invoice, contract, or other documents. The second step is to go to the Secretary of State’s website, complete a business search for the company name and download the Certificate of Incorporation for companies that are a corporation. If you can determine that an entity is a corporation from one of these two indicators and has no reportable payments (for example, medical or attorney payments) you do not have to request Form W-9. Please note that foreign corporations are outside the scope of this discussion.
Internal Revenue Code section 1.6041-3 details payments for which no return of information is required under section 6041. Paragraph (p)(1) of this section states that an information return is not required for payments made to “a corporation described in section 1.6049-4(c)(1)(ii).” See Are payments to corporations reportable on a 1099-MISC form? for a discussion of exceptions.
Section 1.6049-4(c)(1)(ii)(A) listed below states that a payer may treat a corporation as an exempt recipient (who is generally exempt from information reporting) based on a properly completed Form W-9 or one of the indicators described in paragraph (c)(1)(ii)(A).
There are two ways in practice that accounting departments comply with these indicators so they are not required to obtain Form W-9. The first step is to look for Inc. or similar terminology on a company’s website, invoice, contract, or other documents. The second step is to go to the Secretary of State’s website, complete a business search for the company name and download the Certificate of Incorporation for companies that are a corporation. If you can determine that an entity is a corporation from one of these two indicators and has no reportable payments (for example, medical or attorney payments) you do not have to request Form W-9. Please note that foreign corporations are outside the scope of this discussion.
IRC Section 1.6049-4(c)(1)(ii)(A)
(ii) Exempt recipient defined. The term exempt recipient means any person described in paragraphs (c)(1)(ii)(A) through (Q) of this section. An exempt recipient is generally exempt from information reporting without filing a certificate claiming exempt status unless the provisions of this paragraph (c)(1)(ii) require a payee to file a certificate.
A payor may, in any case, require a payee that is a U.S. person not otherwise required to file a certificate under this paragraph (c)(1)(ii) to file a certificate in order to qualify as an exempt recipient. See § 31.3406(h)-3(a)(1)(iii) and (c)(2) of this chapter for the certificate that a payee that is a U.S. person must provide when a payor requires the certificate to treat the payee as an exempt recipient under this paragraph (c)(1)(ii). A payor may treat a payee as an exempt recipient based upon a properly completed form as described in § 31.3406(h)-3(e)(2) of this chapter, its actual knowledge that the payee is a person described in this paragraph (c)(1)(ii), or the indicators described in this paragraph (c)(1)(ii).
(A) Corporation. A corporation, as defined in section 7701(a)(3), whether domestic or foreign, is an exempt recipient. In addition, for purposes of this paragraph (c)(1), the term corporation includes a partnership all of whose members are corporations described in this paragraph (c)(1), but only if the partnership files with the payor a certificate stating that each member of the partnership meets one of the requirements of paragraph (c)(1)(ii)(A) (1) through (4) of this section. Absent actual knowledge otherwise, a payor may treat a payee as a corporation (and, therefore, as an exempt recipient) if one of the requirements of paragraph (c)(1)(ii)(A) (1), (2), (3), or (4), of this section are met before a payment is made.
- The name of the payee contains an unambiguous expression of corporate status that is Incorporated, Inc., Corporation, Corp., P.C., (but not Company or Co.) or contains the term insurance company, indemnity company, reinsurance company, or assurance company, or its name indicates that it is an entity listed as a per se corporation under § 301.7701-2(b)(8)(i) of this chapter.
- The payor has on file a corporate resolution or similar document clearly indicating corporate status. For this purpose, a similar document includes a copy of Form 8832, filed by the entity to elect classification as an association under § 301.7701-3(b) of this chapter.
- The payor receives a Form W-9 which includes an EIN and a statement from the payee that it is a domestic corporation.
- The payor receives a withholding certificate described in § 1.1441-1(e)(2)(i), which includes a certification that the person whose name is on the certificate is a foreign corporation.
In conclusion
Payments made to corporations may not need to be reported on an information return, such as Form 1099-MISC, subject to certain exceptions, as per the Internal Revenue Code (IRC). A payer may treat a corporation as an exempt recipient if it satisfies one of the three indicators outlined by IRC. There are two ways in practice that accounting departments comply with these indicators, including looking for Inc. or similar terminology on a company’s document or downloading the Certificate of Incorporation for companies that are a corporation from the Secretary of State’s website.
FAQ
Do payments made to corporations require information reporting on Form 1099-MISC?
No, payments made to corporations do not require information reporting on Form 1099-MISC, subject to certain exceptions.
What are the indicators that allow payers to treat corporations as exempt recipients?
The indicators that allow payers to treat corporations as exempt recipients include a completed Form W-9 with an EIN and a statement from the payee, a domestic corporate resolution, or the name containing an unambiguous expression of corporate status.
Is it necessary to obtain a Form W-9 for a corporation if one of the indicators is satisfied?
No, if you can determine that an entity is a corporation from one of the indicators and has no reportable payments, you do not have to request Form W-9.
How can accounting departments comply with the indicators without obtaining a Form W-9?
Accounting departments can comply with the indicators by looking for Inc. or similar terminology on a company’s website, invoice, contract, or another document, or by going to the Secretary of State’s website and downloading the Certificate of Incorporation for companies that are a corporation.
What section of the Internal Revenue Code details payments for which no return of information is required?
Internal Revenue Code section 1.6041-3 details payments for which no return of information is required under section 6041.
What is the exception to reporting payments made to corporations on Form 1099-MISC?
Paragraph (p)(1) of section 1.6041-3 states that an information return is not required for payments made to “a corporation described in section 1.6049-4(c)(1)(ii).”
What is the definition of an exempt recipient?
An exempt recipient is any person described in paragraphs (c)(1)(ii)(A) through (Q) of section 1.6049-4. Exempt recipients are generally exempt from information reporting without filing a certificate claiming exempt status.
Can a payor require a payee to file a certificate to qualify as an exempt recipient?
Yes, a payor may require a payee that is a U.S. person not otherwise required to file a certificate in order to qualify as an exempt recipient.
What is the certificate that a payee must provide when a payor requires it to treat the payee as an exempt recipient?
The certificate that a payee must provide when a payor requires it to treat the payee as an exempt recipient is described in § 31.3406(h)-3(a)(1)(iii) and (c)(2) of the chapter.
Does the definition of a corporation under the Internal Revenue Code include foreign corporations?
Yes, the definition of corporation under the Internal Revenue Code includes both domestic and foreign corporations. However, foreign corporations are outside the scope of this discussion.