1099 for real estate commisions paid to S corp shareholder

5 replies
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Realtor is sole owner in an S-corp. Can she receive a 1099 for the commissions and a W-2 for the office work she does. Could only find a single court case supporting it.

Lacerte Tax

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BobKammanAnswer

Level 15

Sounds fine to me. The fact this is a broker, not just an agent, helps. I used to have a similar situation where the broker paid W-2 wages to a family member for office work, and 1099 commissions for sales. This was not done for tax reasons; it probably resulted in more tax being paid. But it was a helpful arrangement when valuing the business when it was sold.

IRonMaN

Level 15

No. W-2 wages only for a Sub S shareholder.

Slava Ukraini!

BobKamman

Level 15

A 1099 and W-2 from whom? From her own S corporation, or from her broker? I don't see a problem with her broker giving her corporation a 1099-NEC. There may be state law that prevents that from flowing through to her on a 1099-NEC. But the fuss about S corporations is that they are abused to avoid SE taxes. That wouldn't happen in the situation you describe. But I'm trying to understand what she is trying to accomplish by doing it that way.

The fact that you can't find any court cases, just means that IRS hasn't issued many notices of deficiency where it saw a problem with this.

George4Tacks

Level 15

Are you stating that they are giving the office their SSN instead of the EIN of the S-Corp? The W-2 and 1099 are both in the SSN?

If they are gonna be an S-Corp, they better learn how to act like one.

Answers are easy. Questions are hard!

R

RoyS976Author

Level 3

No.

S Corp has a single shareholder, who is also a broker/agent.

S Corp pays commissions to shareholder and other agents based on sales made.

S Corp pays shareholder a salary to cover her management time.

S Corp gives shareholder a 1099 for sales commissions paid to her and a W-2 for management time.

S Corp gives 1099s to other agents for commissions paid to them.

BobKammanAnswer

Level 15

Sounds fine to me. The fact this is a broker, not just an agent, helps. I used to have a similar situation where the broker paid W-2 wages to a family member for office work, and 1099 commissions for sales. This was not done for tax reasons; it probably resulted in more tax being paid. But it was a helpful arrangement when valuing the business when it was sold.

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