I am a naturopathic medical practitioner and own an S-Corp for my personal client work. However, I do some independant contractor work for anotehr company. If they issued me a 1099, can I claim this as part of my S-Corp income? If not, is it possible to set up payment to my S-corporation, as I act on behalf of my S-Corp (ie. protecting my personal liability and avoiding SE tax via 1099)
The income should be reported by the individual or business that provided the service and earned the income. If the 1099 is in your name, you could ask the issuing Company to change to the S-Corp if that is who earned the income. In the future, have a written agreement between your S-Corp and the Company you are providing service. Also, provide them with a Form W9, so they know where to report the 1099 income at year end.
You will have to report it on your personal tax return on Schedule C. If you deposited it into your S corporation bank account, it will be counted as income twice. You can expense it on your Schedule C and net to -0- since it included in your corporation income.
In the future, provide your S corporation name and federal ID# to insure that the income will be reported as corporation income rather than personal income.
You should be able to attribute the earnings to your S corporation. I would recommend a written independent contractor agreement between your S corporation and the third party company. You should provide the third party company with a signed IRS Form W-9 for your S corporation. The W-9 should list the legal entity name of the S corporation, the tax ID number for the S corporation, as well as the mailing address. Be sure to indicate the entity classification as "S Corporation" in Box 3. If the third party company issues you a Form 1099 at the end of the year, the compensation will be reported as paid to your S corporation rather than you as an individual. It's true that net earnings flowing through an S corporation are not subject to self employment taxes; however, as the principal shareholder of the S corporation, you should setup payroll and pay yourself a reasonable wage for being an employee of the company. The IRS heavily scrutinizes S corporations for reasonable compensation issues for sole shareholders.