PLLC and how to be taxed

[4thMolar]

Hey everyone,

I am a general dentist that started a new position for the month of Dec 2020 and was paid as an independent contractor. I never received a 1099 from them and when I inquired about it and spoke to the accountant, they mentioned since I am incorporated I have to file a 1120 and K-1. I established a single member PLLC (because of this job), but don't I get to choose how I am taxed? For 1120, isn't this being taxed as a corporation? But as the only member, can't I just get a 1099 and file my income via personal tax return, vs having to do a 1120 and business tax return? The accountant they have mentioned if I am incorporated, then I do not need to be issued a 1099. But I feel as though I should just get a 1099 and file through personal? I'm confused in this area and wondering if I need to get an actual accountant and not turbotax either. Thanks anybody for shedding some light.

[DrSam]

Requisite "I am not a tax attorney" here, but I think the following might be applicable to your situation.

From the instructions for Box 6 of IRS form 1099-MISC and 1099-NEC (2020)

Box 6. Medical and Health Care Payments Enter payments of $600 or more made in the course of your trade or business to each physician or other supplier or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If payment is made to a corporation, list the corporation as the recipient rather than the individual providing the services. Payments to persons providing health care services often include charges for injections, drugs, dentures, and similar items. In these cases, the entire payment is subject to information reporting. You are not required to report payments to pharmacies for prescription drugs.

The exemption from issuing Form 1099-MISC to a corporation does not apply to payments for medical or health care services provided by corporations, including professional corporations. However, you are not required to report payments made to a tax-exempt hospital or extended care facility or to a hospital or extended care facility owned and operated by the United States (or its possessions), a state, the District of Columbia, or any of their political subdivisions, agencies, or instrumentalities.

[DavidGlennCPA]

The default classification of a single-member PLLC is as a disregarded entity so unless you made an entity classification election you're not taxed as a corporation.

It's possible the accountant is mistaken or you filled out the W-9 wrong and indicated you're taxed as a corporation.

So technically you should get a 1099 from this place but don't let it hold you up from filing. You can simply add up how much you were paid and report it on your Schedule C.

The real question for your situation is whether or not it's beneficial to elect for your PLLC to be taxed as an S-corporation. That requires running a tax calculation for your expected income both as a sole proprietor (how you are now) and as an S-corporation with a reasonable salary.

[4thMolar]

The default classification of a single-member PLLC is as a disregarded entity so unless you made an entity classification election you're not taxed as a corporation.

It's possible the accountant is mistaken or you filled out the W-9 wrong and indicated you're taxed as a corporation.

So technically you should get a 1099 from this place but don't let it hold you up from filing. You can simply add up how much you were paid and report it on your Schedule C.

The real question for your situation is whether or not it's beneficial to elect for your PLLC to be taxed as an S-corporation. That requires running a tax calculation for your expected income both as a sole proprietor (how you are now) and as an S-corporation with a reasonable salary.

Thank you! I only have one month of income from this position (dec 2020) and when I set up my PLLC I do not recall selecting an option to be taxed as a corporation (am I even given this option?). I informed the business owners and their accountant today that I want to be taxed as a disregarded entity essentially and file through personal taxes. I will need to fill out a w-9 form.

[DavidGlennCPA]

You formed the PLLC by filing paperwork your state's secretary of state.

The election to be taxed as a corporation or S-corporation is filed with the IRS.

Even if you elect to be taxed as a corporation you will legally be a PLLC. That's the difference between legal entity choice and which set of tax rules applies to that legal entity.

[4thMolar]

You formed the PLLC by filing paperwork your state's secretary of state.

The election to be taxed as a corporation or S-corporation is filed with the IRS.

Even if you elect to be taxed as a corporation you will legally be a PLLC. That's the difference between legal entity choice and which set of tax rules applies to that legal entity.

Thank you for all your help! I explained this to the accountant and he will issue the 1099.

another question that is a bit off topic, but related to deductions. Since I started the 1099 position in December, am I still able to deduct expenses (such as CE, malpractice, license renewal) for 2020 even if those expenses occurred before December? My mind tells me that I cannot and it seems like it would be some type of tax fraud if I counted deductions that happened earlier in the year even though I didn’t start the 1099 position until December. TurboTax thinks this is fine, but I want to make sure so that I don’t have any future trouble with the IRS. Thank you again!

[4thMolar]

"The real question for your situation is whether or not it's beneficial to elect for your PLLC to be taxed as an S-corporation. That requires running a tax calculation for your expected income both as a sole proprietor (how you are now) and as an S-corporation with a reasonable salary."


Can you or anyone provide any resources on educating myself on running a tax calculation to see how I should be taxed? I'm meeting with an accountant in a couple of weeks and would like to discuss this with him and have some knowledge of the differences and advantages/disadvantages. Thank you.

[DavidGlennCPA]

The accountant should be able to run both calculations using their tax planning software and to compare the results.