Hello and thank you for your question. You would be better off
receiving your income from the corporation on Form 1099 rather than
Form W-2, but it's very unlikely that you qualify to use Form 1099.
"If you must file any Form 1098, 1099, 5498, or W-2G with the IRS and
you are filing paper forms, you must send a Form 1096 with each type
of form as the transmittal document. You must group the forms by form
number and submit each group with a separate Form 1096. For example,
if you file Forms 1098, 1099-A, and 1099-MISC, complete one Form 1096
to transmit Forms 1098, another for Forms 1099-A, and a third for
Forms 1099-MISC. Specific instructions for completing Form 1096 are
included on the form. Also, see Transmitters, paying agents, etc. on
page GEN-9. For information about filing corrected returns, see
Corrected Returns on Paper Forms on page GEN-12."
Employees get Form W-2 while non-employees ("independent contractors")
get Form 1099.
Who Are Employees?
I would expect that a corporate officer is an employee under the IRS test:
"Both of these forms are called information returns. The Form W-2 is
used by employers to report wages, tips and other compensation paid to
an employee. The form also reports the employee's income tax and
Social Security taxes withheld and any advanced earned income credit
payments. The Form W-2 is provided by the employer to the employee and
the Social Security Administration. A Form 1099-MISC is used to report
payments made in the course of a trade or business to another person
or business who is not an employee. The form is required among other
things, when payments of $10 or more in gross royalties or $600 or
more in rents or compensation are paid. The form is provided by the
payor to the IRS and the person or business that received the
"It is your [company's] responsibility, as an employer, to file Copy A
of Form W-2, Wage and Tax Statement, with the Social Security
Administration (SSA) for your employees, showing the wages paid and
taxes withheld for the year. Since Form W?2 is the only document used
to transmit information on your employees' social security and
Medicare wages for the year, it is very important to prepare the forms
correctly and timely.
There are separate Form W-2 and W-3 Instructions. Use Form W-3,
Transmittal of Wage and Tax Statements, as a cover sheet when filing
one or more Forms W?2 with the SSA."
"The official Form W?2 comes in 6 copies. Copy A must be sent to the
Social Security Administration with the transmittal Form W?3 by the
last day of February for the current tax year. Form W?3 is used to
transmit the Forms W?2 and contains figures reflecting the box totals
of all the Forms W?2 being sent. The address for mailing Copy A of the
Forms W?2 and/or W?3 is listed in the separate Form W-2 and W-3
[The penalty for late filing is described on page 8 of the .pdf]
You ask whether 1099 or W-2 is best. As I noted above, unfortunately
1099 is best, because there are serious consequences if your
corporation paid W-2 wages to you without proper income tax
withholding. If you think you can justify using Form 1099 instead of
Form W-2, then even if you turn out to be wrong you might avoid
penalties if you can fit within the "Tips" described here:
IRS Offers Tips on How to Correct Reporting of Misclassified Employees
Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
Search terms used:
employer penalty failure withhold site:irs.gov
employee independent w-2 1099 site:irs.gov
Good luck and thank you again for letting us help.
Google Answers Researcher
Clarification of Answer by
27 Apr 2006 05:15 PDT
Not every officer has to be an employee, so reporting officer
compensation on Form 1120 Schedule E shouldn't be determinative.
"You may find yourself in a situation where you work for the S
corporation, partnership, etc. in a capacity as an independent
contractor. For example, you're the president and a 50% shareholder of
Madison Inc., which owns a retail store. You're also a licensed
plumber. You do extensive plumbing work in the store which you bill
through your plumbing business. As long as the charge is based on an
arm's length transaction, there should be no problems. Similarly, the
corporation could be one of several related businesses where another
corporation performs management functions for the other businesses.
Again, the charge should be based on an arm's length transaction."