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Reporting of settlement payments by business entity type
December 27, 2024
Q. Are settlements paid to LLC-C, LLC-S, C-Corp, S-Corp exempt from 1099 reporting?
A.
(Answered by IOFM's third-party tax experts)
The categories of tax status you listed are "exempt recipients" for purposes of 1099 reporting of settlement payments of legal damages which otherwise would be reported in Box 3 (Other income) of Form 1099-MISC. The exclusion is provided in Reg. sec. 1.6041-3(p)(1). In an instance that appeared to be settlement for lost business income from medical or health care…
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