Accurate depreciation tracking yields numerous benefits. It promotes financial accuracy, tax compliance, and cost management, while also supporting strategic decision-making.

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How to Calculate Accumulated Depreciation

The IRS Form 1099-K threshold has been simplified at the federal level, but the core challenge remains separating gross payments from taxable profit. Mastering the gap between gross payments and these profits is the real challenge—even with a higher threshold, without experts on your side.

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What Is a 1099-K? A Guide to the New Rules for 2025

While you may have heard mention of an "LLC tax rate," the reality is that there is no single rate. Instead, owners and entrepreneurs layer federal income tax, self-employment tax, state levies, and elections, such as the S corporation election, onto one another—creating a personal “tax stack.” Understanding every piece of that stack is the first step toward shrinking your LLC tax liability

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LLC Tax Rate: How It's Calculated & How to Lower It

Running<a href="https://1800accountant.com/blog/s-corporation">&nbsp;your business as an S corporation</a> usually indicates that you wear many hats. You might understand the benefits of pass-through taxation while embracing reasonable salary strategies, but few topics trip up growing companies faster than the rules surrounding S corps<a href="https://1800accountant.com/blog/types-of-1099-tax-forms">&nbsp;and Internal Revenue Service (IRS) Form 1099</a>. There are two primary schools of thought surrounding this issue:&nbsp;<ul><li>Some business owners assume S corps<a href="https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return" target="_blank">&nbsp;never deal with 1099s</a></li><li>Other owners file every business tax form they can out of an abundance of caution</li></ul>Both approaches invite errors and, in extreme cases, penalties and additional scrutiny from the IRS, which can be disruptive. The truth sits comfortably in between: S corps are usually exempt from receiving 1099s,<a href="https://1800accountant.com/blog/how-to-issue-a-1099">&nbsp;yet they must issue them just like any other business</a>. Several critical exceptions apply, which we detail in this article.Understanding the line between exemption and obligation is essential for stress‑free tax management and healthy vendor relationships throughout the tax year.&nbsp;<h2>Key Highlights</h2><ul><li>S corps are exempt from receiving most Form 1099s due to the corporate exemption, but the rule has three major exceptions.</li><li>Payments for legal services, medical and healthcare services, and most card or third-party network transactions reported on<a href="https://www.irs.gov/businesses/what-to-do-with-form-1099-k" target="_blank">&nbsp;Form 1099-K</a> can trigger a 1099 to an S corp.</li><li>Every S corporation still has a duty to issue Forms 1099-NEC, Nonemployee Compensation, and 1099‑MISC, Miscellaneous Information, to qualifying vendors, self-employed freelancers, landlords, and independent contractors paid $600 or more in a calendar year.</li><li>Collecting IRS Form W-9, Request for Taxpayer Identification Number and Certification, from each vendor before payment is the cornerstone of year‑round 1099 compliance.</li><li>Failing to file during tax season or filing late can cost up to $310 per form in penalties, with steeper fines for intentional disregard.</li><li>Full-service bookkeeping paired with expert CPA guidance simplifies W‑9 management, payment tracking, and mandatory e‑filing requirements</li></ul><h2>Why S Corps Generally Don’t Receive 1099s</h2>There is a fundamental reason for the 1099 exemption for S corporations.<h3>Understanding the "corporate exemption"</h3>The IRS requires payers to file Form 1099‑NEC or 1099‑MISC for most business payments of $600 or more unless the recipient operates as a corporation.Because an<a href="https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations" target="_blank">&nbsp;S corporation</a> is, at its core, a corporation, payments to your S corp fall under this corporate exemption. The IRS already gathers the same income data through the annual filing of Form 1120‑S, U.S. Income Tax Return for an S Corporation, so a redundant 1099 would offer no additional insight , which is why the exemption exists. <h3>The pass‑through nature of S corporations</h3>Although an S corp files its own return, the income ultimately “passes through” to shareholders, who then report it on their individual Schedule K‑1, avoiding double taxation that C corps are subject to.Choosing an S corp business structure – often with the help of a trusted accounting professional – can optimize self‑employment taxes and streamline reporting. The takeaway: once you elect S corp status, you typically stop receiving 1099s for your own revenue streams, but you may have to issue them for work or services performed.The role of Form W‑9 for verificationVendors do not need a crystal ball to know whether you operate as a C corporation or an S corporation.<a href="https://1800accountant.com/blog/all-about-form-w-9">&nbsp;Form W‑9</a> tells them. By checking the “S corporation” box and supplying your Employer Identification Number (EIN), which acts as a Social Security number for your small business, you put payers on notice that a 1099 is not required – unless one of the exceptions below applies.On the flip side, you should collect a W‑9 from every vendor before payment to verify their entity status so that you can put your crystal ball in storage! Affordable,<a href="https://1800accountant.com/services/bookkeeping">&nbsp;full-service bookkeeping</a> from 1-800Accountant can automate W‑9 requests and store the materials so you won't have to scramble in January (when 1099s are typically issued).<h2>Exceptions: When an S Corp Must Receive a 1099</h2>There are specific situations where the general exemption does not apply, requiring payers to issue a 1099 to an S corporation for tax purposes.<h3>The legal services exception</h3>Payments of $600 or more for legal services are always reported on<a href="https://1800accountant.com/blog/form-1099-nec-for-small-business-owners">&nbsp;IRS Form 1099‑NEC</a> – even if the law firm or solo attorney is incorporated. The following payments qualify:&nbsp;<ul><li>Retainer deposits</li><li>Settlement fees</li><li>General counsel arrangements</li></ul>If your S corporation provides legal services, expect clients to send you a 1099‑NEC and reconcile that income against your books.<h3>The medical and healthcare payments exception</h3>Medical and healthcare payments of $600 or more belong on IRS Form 1099‑MISC, line 6, regardless of the provider’s entity type. Typically, if your business is structured as an S corp and hits the income threshold, you will receive IRS Form 1099-MISC, including:&nbsp;<ul><li>Dentists</li><li>Therapists</li><li>Telehealth groups</li></ul>Healthcare-focused businesses often juggle insurance reimbursements, patient payments, and third-party vendors, requiring time-consuming recordkeeping to remain up to date. Take back your time and leave the complexity behind with 1-800Accountant's full-service bookkeeping solution for your<a href="https://1800accountant.com/services/industry/healthcare">&nbsp;healthcare-focused operations</a>.<h3>Form 1099‑K for e‑commerce and card payments</h3><a href="https://1800accountant.com/services/industry/ecommerce">If you accept credit cards, PayPal, or similar platforms</a>, you may receive IRS Form 1099‑K from your payment processor. The form reports gross receipts processed through its network.While sales reporting thresholds have been gradually reduced, aiming to be triggered by $600 or more in sales in 2026, the passage of the One Big Beautiful Bill Act has eliminated previous reporting thresholds. Now, most platforms must issue a 1099‑K once a seller exceeds $20,000 in sales and 200 transactions.&nbsp;<a href="https://1800accountant.com/blog/7-documents-your-accountant-needs">An integrated accounting system</a> is critical and will help reconcile 1099‑K totals, including:&nbsp;<ul><li>Actual sales</li><li>Refunds</li><li>Fees</li></ul><h2>S Corp’s Duty to Issue 1099s</h2>Ignoring outbound 1099 obligations is one of the fastest ways to attract unwanted IRS attention. Your S corporation is a payer in many everyday scenarios, and the same $600 threshold applies.<h3>Reporting payments to independent contractors on Form 1099‑NEC</h3>If you paid an individual sole proprietor, partnership, or limited liability company (LLC) $600 or more for services during the calendar year, you must furnish<a href="https://www.irs.gov/faqs/small-business-self-employed-other-business/form-1099-nec-independent-contractors/form-1099-nec-independent-contractors" target="_blank">&nbsp;IRS Form 1099‑NEC</a> by January 31 of the following year. Correct worker tax classification is vital.Confusing an employee (who needs a W‑2) with a contractor (who needs a 1099‑NEC) can<a href="https://1800accountant.com/blog/how-often-do-small-businesses-get-audited">&nbsp;trigger payroll tax audits</a> and back wage payments.<a href="https://1800accountant.com/services/payroll">&nbsp;Full‑service payroll from 1-800Accountant</a> integrates contractor and employee records, reducing classification risk.<h3>Issuing Form 1099‑MISC for other payments</h3><a href="https://www.irs.gov/forms-pubs/about-form-1099-misc" target="_blank">Form 1099‑MISC</a> still covers certain non‑service payments that fall outside normal service fees, including:&nbsp;<ul><li>Rent</li><li>Prizes and awards</li><li>Royalties</li><li>Fishing boat proceeds</li><li>Attorney payments</li></ul>Landlords who rent real estate, office space, or vehicle rentals, for example, are common IRS 1099‑MISC recipients. Real estate investors who operate through an S corp can outsource the entire filing process to property‑management‑friendly accounting solutions, such as those offered by 1-800Accountant.&nbsp;<h3>Form 1099 requirements for S corps from collection to filing</h3>Since 2024, businesses that file 10 or more information returns of any type must e-file. Manual paper filing is no longer an option for most S corps. A compliant workflow looks like this:<ol><li>Collect W‑9s during vendor onboarding.</li><li>Track payments in real time using automated bookkeeping software.</li><li>Review thresholds in early January and verify data.</li><li>E‑file 1099s through an authorized transmitter or a full‑service provider by January 31 (recipient copy) and the March e‑file deadline.</li></ol>Maintaining compliance for your S corporation is a year-round process.&nbsp;<h2>IRS Penalties for 1099 Mismanagement</h2>There is a financial risk for non-compliance.&nbsp;<ul><li>Penalties start at $60 per form if you file within 30 days of the deadline</li><li>These penalties climb to $310 per form after August 1</li><li>Penalties can reach $630 per form for willful neglect</li></ul>The fines stack up quickly when multiple vendors are involved. In extreme cases, the IRS may assess separate penalties for failure to furnish copies to recipients.<h2>Streamline Your S Corp’s Tax Compliance With 1‑800Accountant</h2>S corps enjoy the peace of mind that comes with the corporate exemption, yet 1099 responsibilities still loom large. Building a proactive system transforms 1099 compliance from a frantic January task into a predictable process, covering:&nbsp;<ul><li>W‑9 collection</li><li>Threshold tracking</li><li>Accurate, on-time e‑filing&nbsp;</li></ul>1‑800Accountant, America's leading virtual accounting firm, pairs dedicated CPAs, EAs, bookkeepers, and tax professionals with cutting‑edge software<a href="https://1800accountant.com/blog/llc-tax-deadlines">&nbsp;so you never miss a filing deadline</a>. Accurate books underpin every 1099, and our experts classify each payment correctly long before the IRS looks at your return. Whether you need help reconciling 1099‑K totals from multiple platforms or need the professional expertise to handle all contractor filings, we have you covered.Ready to trade spreadsheets for certainty with affordable, tax-deductible support?<a href="https://1800accountant.com/services/small-business-taxes">&nbsp;Schedule a free consultation</a>, usually 30 minutes or less, and discover how effortless year‑round compliance can be with experts on your side.&nbsp;

Running your business as an S corporation usually indicates that you wear many hats. You might understand the benefits of pass-through taxation while embracing reasonable salary strategies, but few topics trip up growing companies faster than the rules surrounding S corps and Internal Revenue Service (IRS) Form 1099.&nbsp;

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Do S Corps Get 1099s? Rules & Exceptions Explained

Small business owners and entrepreneurs often choose to operate their businesses as S corporations for several reasons, including the potential to save thousands in payroll taxes annually. Yet, those savings come with a strict rulebook. From “reasonable compensation” to shareholder basis, the Internal Revenue Service (IRS) sets brig

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Essential Guide to S Corp Distributions and IRS Rules

Starting a business and embarking on your entrepreneurial journey is an exciting milestone. As you craft your business plan, strategize marketing efforts, and assemble your dream team, it's important not to forget the vital task of incorporating your business. It may sound complicated, but in reality, you’re simply creating a legal entity that is separate from yourself.

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How to Incorporate a Business in 6 Simple Steps

Owners shoulder an immense amount of risk and are entitled to the rewards of running a successful business, including the ability to take advantage of owner distributions. Owner distributions are more than a simple transfer of cash from business to owner

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Owner Distribution: A Guide to Paying Yourself

While there are many advantages to operating as a sole proprietor, which is an unincorporated business, this entity type also presents its own set of challenges. Chief among them: how to efficiently pay yourself.
<a href="https://1800accountant.com/blog/pay-yourself-small-business-owner">Paying yourself</a> is more complex than receiving a traditional paycheck from an employer, as it involves unique rules, tax obligations, and strategic decisions that impact future growth.&nbsp;
It's essential that you master these rules to help avoid costly surprises and keep your personal and business finances on solid ground. Use this excellent guide to paying yourself<a href="https://1800accountant.com/blog/taxes-sole-proprietorships"> as a sole proprietor to learn how</a>!&nbsp;
<h2>Key highlights</h2>
<ul>
 <li>
 An owner’s draw is money taken from a business's profits,<a href="https://1800accountant.com/blog/owners-draw-vs-salary"> and it is not considered a salary</a>.
 </li>
 <li>
 Always transfer pay from a business account to a personal account and label it as an owner’s draw.
 </li>
 <li>
 You pay self-employment tax of 15.3% on profit up to $176,100 for 2025, up from$168,600 in 2024.&nbsp;
 </li>
 <li>
 Once your yearly profit exceeds $40,000, you may reduce taxes by opting for S corporation status, which adds payroll tasks.
 </li>
 <li>
 Accountants and affordable, full-service bookkeeping can manage draw entries, tax estimates, and deadlines.
 </li>
 <li>
 <a href="https://www.irs.gov/businesses/small-businesses-self-employed/paying-yourself" target="_blank">Review your pay strategy</a>, tax set-asides, and business structure every quarter as revenue grows.
 </li>
</ul>
<h2>What is an Owner’s Draw?</h2>
An<a href="https://1800accountant.com/blog/owners-draw"> owner’s draw</a> is simply money you take out of the business for personal use. Because a sole proprietorship is not a separate legal entity, the draw is not a business expense, and no tax is withheld at the moment of transfer. The IRS still expects its share, but this calculation is made on your personal income tax return using<a href="https://1800accountant.com/blog/sole-proprietorship"> Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)</a>, which you will file by the April 15 deadline.
It's essential to transfer funds from a dedicated business account to a personal account to maintain clear records. Combining the two creates messy records and increases audit risk.&nbsp;
<h2>Why You Can’t Pay Yourself a Salary</h2>
Traditional employees receive W-2 wages because they work for a separate employer. As a sole proprietor, you are the business,<a href="https://1800accountant.com/blog/how-to-pay-yourself-from-llc"> so you cannot issue yourself a traditional paycheck</a> or withhold payroll taxes.
While sole proprietors are barred from collecting a traditional paycheck, they have something traditional employees lack: flexibility. As a sole proprietor, you can take draws whenever cash is available, but you need to exercise discipline. Every draw reduces working capital, and you will still owe income tax and self-employment tax later. Understanding that legal distinction prevents costly bookkeeping errors and helps you plan for a pro-growth strategy.
<h2>Calculating and Staying Compliant with Self-Employment Tax and Quarterly Estimated Tax Payments</h2>
<h3>Calculating self-employment tax</h3>
Most taxpayers contribute to Social Security and Medicare programs. Traditional employees contribute 7.76% of their taxable income to Social Security and Medicare taxes, with their employers matching that contribution.<a href="https://1800accountant.com/blog/tax-strategies-self-employed-v-small-business-owners"> This is different for self-employed individuals</a>.
Sole proprietors<a href="https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes" target="_blank"> pay both halves</a>, currently 15.3% on the first $176,100 of net earnings for 2025, up from $168,600 in the previous tax year. Only your net profit matters—draws do not impact this calculation. While deductions and credits are limited for traditional employees, self-employed individuals have numerous opportunities to reduce their tax liability, including deducting half of their self-employment tax contributions.
<h3>Calculating and paying quarterly estimated taxes</h3>
Because draws have no withholding, you must prepay income tax and self-employment tax each quarter using IRS Form 1040-ES, Estimated Tax for Individuals.
The challenge is accurately forecasting profit months before the end of the year, especially for seasonal businesses and other operations with inconsistent business income. Calculations that underestimate your contributions or those submitted after the deadline can trigger penalties or increased scrutiny by the IRS. Because of this, many small business owners and entrepreneurs set aside 25–30 percent of net income, then refine the number as financial reports come in throughout the year.&nbsp;
Quarterly estimated tax deadlines:&nbsp;
<ul>
 <li>
 April 15
 </li>
 <li>
 June 15
 </li>
 <li>
 September 15
 </li>
 <li>
 January 15
 </li>
</ul>
Delegating this responsibility to the specialists powering 1-800Accountant’s<a href="https://1800accountant.com/services/quarterly-estimated-taxes"> tax-deductible quarterly estimated tax service</a> provides peace of mind and the freedom to focus on other aspects of your sole proprietorship.
<h2>Determining Your Paycheck: How Much Should You Take?</h2>
There are two prevailing paycheck strategies:&nbsp;
<ul>
 <li>
 The bare minimum approach to fuel reinvestment.
 </li>
 <li>
 The market rate approach for personal financial predictability.
 </li>
</ul>
Both approaches work when they start with clear, precise numbers:
<ol>
 <li>
 Net profit trend – Is your business consistently in the black?
 </li>
 <li>
 Cash-flow buffer – Will the account still meet next month’s expenses after a draw?
 </li>
 <li>
 Tax reserve – Have you set aside funds for quarterly payments?
 </li>
 <li>
 Personal budget – What do you need to live without relying on credit?
 </li>
</ol>
Relying solely on a bank balance is risky; timing differences can obscure true profitability.<a href="https://1800accountant.com/services/bookkeeping"> Up-to-date profit &amp; loss statements</a> and other materials generated by 1-800Accountant's affordable, full-service bookkeeping solution reveal precisely what your business can afford so you can schedule steady draws or quarterly “profit bonuses” with confidence.
<h2>Step-by-Step Guide to Paying Yourself Correctly as a Sole Proprietor</h2>
<h3>Step 1: Absolute separation of finances</h3>
It's critically important to maintain a separate business bank account for your sole proprietorship. Here's what to do if you haven't taken that step to separate business and personal finances yet.
Open a business checking account and route all revenue through it. Pay business bills from that account, and make sure you never swipe the business debit card for personal items. Clear separation of your accounts has many benefits, including:&nbsp;
<ul>
 <li>
 Simplifying bookkeeping tasks.
 </li>
 <li>
 Supporting loan applications.
 </li>
 <li>
 Illustrating that you respect the line between yourself and your business venture.
 </li>
</ul>
<h3>Step 2: Establish a system for draws and record-keeping</h3>
Owner's draws and record-keeping are closely tied together. Consider these steps as you establish a system for your business.&nbsp;
<ol>
 <li>
 Verify funds – Review cash flow and confirm the account can support a draw.
 </li>
 <li>
 Transfer electronically – Move money to your personal account via ACH or check.
 </li>
 <li>
 Record the draw – Categorize the transaction as “Owner’s Draw” in your accounting software.
 </li>
 <li>
 Track taxes – Update your quarterly estimate worksheet to ensure the next payment is accurate and up-to-date.
 </li>
</ol>
If you would rather focus on customers than categorizing transactions, 1-800Accountant's dedicated bookkeepers can tag each draw and<a href="https://1800accountant.com/blog/understanding-the-schedule-c-tax-form"> keep your records Schedule C-ready</a>, providing a clean audit trail.
<h2>Optimizing Your Pay by Changing Your Business Structure</h2>
A sole proprietorship is the simplest structure, yet it may not stay the most tax-efficient forever. Reaching higher profit levels means higher self-employment tax, and that is where restructuring as an S corporation can positively impact your operations.
<h3>When to consider an S Corporation election</h3>
Once your sole proprietorship's net business profit exceeds $40,000–$50,000 annually, the savings from switching to another business entity (other entities include a limited liability company, single-member LLC, and C corp) often outweigh the extra administrative costs. In an<a href="https://www.nerdwallet.com/article/small-business/how-to-pay-yourself-as-an-s-corp" target="_blank"> S corp, you split your pay</a> between a reasonable salary, also known as reasonable compensation, which is subject to payroll tax, and a distribution, which is not subject to self-employment tax.
In business, timing and expertise matter. Efficiently transition from a sole proprietorship to an S corporation with 1-800Accountant's affordable<a href="https://1800accountant.com/services/business-tax-advisory"> tax advisory</a> and<a href="https://1800accountant.com/services/entity-formation"> entity formation</a> services.&nbsp;&nbsp;
<h3>Navigating the complexity of an S Corp</h3>
While there are numerous benefits of operating your business as an S corporation, it typically comes with an increased administrative burden, including:&nbsp;
<ul>
 <li>
 Running formal payroll.
 </li>
 <li>
 Submitting fees to the state.
 </li>
 <li>
 Meeting stricter compliance requirements.
 </li>
</ul>
The decision to restructure is a pivotal moment in your career, where expert guidance is crucial to weigh the pros and cons. 1-800Accountant’s affordable, year-round<a href="https://1800accountant.com/services/business-tax-advisory"> tax advisory service</a> models various scenarios, while our<a href="https://1800accountant.com/services/entity-formation"> entity formation</a> experts file the election and register your new entity, ensuring compliance from day one.
<h2>Partner with 1-800Accountant for Financial Clarity and Growth</h2>
As this article illustrates,<a href="https://www.score.org/resource/blog-post/basics-paying-yourself-entrepreneur" target="_blank"> paying yourself as a sole proprietor</a> is not a one-time checklist item, but a foundational business skill that you should master. Managing your pay is a financial strategy that evolves with your business. The complexities of draws, quarterly estimated taxes, and entity structuring may be viewed as obstacles by some, but are, in reality, manageable challenges and opportunities with the right support from the experts at 1-800Accountant, America's leading virtual accounting firm.
When you trust our expert bookkeepers with your complex financial work, they seamlessly address bookkeeping tasks, ensuring compliance and peace of mind. In addition to affordable, full-service bookkeeping, our CPAs with more than 17 years of experience on average, and tax professionals will advise you with our year-round tax advisory services, to help you make strategic business decisions, such as when to transition to an S corp.&nbsp;
Schedule a quick consultation today – typically 30 minutes or less— to learn more and get started.&nbsp;

Paying yourself is more complex than receiving a traditional paycheck from an employer, as it involves unique rules, tax obligations, and strategic decisions that impact future growth.&nbsp;It's essential that you master these rules to help avoid costly surprises and keep your personal and business finances on solid ground.

Blog Thumbnail_How to Pay Yourself as a Sole Proprietor_ A Guide1200x630_2.png

How to Pay Yourself as a Sole Proprietor: A Guide

It's essential to master the art of paying yourself properly. Should that extra cash hit your personal bank account as an S corp shareholder bonus or as a distribution? That single choice affects your payroll tax bill, cash flow, and audit risk. Missteps can trigger backdated taxes or even threaten S corp status, while a well-planned mix can save thousands.

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S Corp Bonus vs Distribution: How to Pay Yourself

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