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  • Writer's picturePaula Field, CPA, CFE

Reporting Payments to other Attorneys – Yes you must do it, says the IRS!

Updated: Jan 30, 2023

Reporting Payments to other Attorneys – Yes you must do it, says the IRS!

The deadline to furnish 1099’s to most recipients is the end of January…so the clock is ticking.

The IRS is paying a lot of attention now towards matching income. They match the income reported to them on 1099’s, W-2’s, Brokerage Statements, K-1’s, etc. to Social Security Numbers…and then to the tax returns.

Failing to report income paid out for services of more than $600 on Form 1099 every year will give you nothing but a heap of trouble from the IRS. I believe there will be a dedicated review of 1099's in the future in every IRS business audit. They even changed the original Form 1099 MISC to accommodate the newly created Form 1099-NEC for Non-Employee Compensation.

When it comes to reporting payments made for legal services, whether to an individual or a firm, the IRS is very clear on this…you have to…even if it’s a corporation. Normally, the IRS allows you to withhold Form 1099 for business taxes as a corporation, however, legal services fall into a bucket all their own.

Report payments to an Attorney in excess of $600 on 1099 MISC, Box 10

Form 1099-MISC is now used to report the following income:

  • At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.

  • At least $600 in:

    • Rents.

    • Prizes and awards.

    • Other income payments.

    • Medical and health care payments.

    • Crop insurance proceeds.

    • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.

    • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.

    • Payments to an attorney.

    • Any fishing boat proceeds.

Lawyers must issue Form 1099 MISC for gross proceeds paid to attorneys. Do not file these in Box 1 of Form 1099-NEC.

These forms are due to the recipient by the end of the month.

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