Re: IRS 20 Questions-bad info

[Joe Schrengohst <jschreng -at- CISCO -dot- COM>]

Nancy Kendall wrote:

"When an agency places you on a job, they are actually hiring your
corporation. Most agencies have no problem establishing a corp-to-corp
relationship, which is a 1099-type relationship. The agency pays your corp
by invoice. Your corp pays you by W-2."

Corrections:
1. A corporation-to-corporation relationship does NOT involve a 1099. There
is no IRS requirement for one corporation to generate a 1099 for any type
of payment to another corporation. (Can you even begin to imagine the
number of 1099's a corporation like GM or IBM would have to generate?)

You should be aware however, that if the IRS selects either corporation
for an audit, then they may elect to track the funds transfers from one
corporation to another to be sure that everyone reported everything
correctly. (If they didn't, then someone's going to get the opportunity
to brush up on the tax laws at government expense -- in jail.)

2. Your corporation can pay you by W-2 or 1099, depending on your role
in and ownership (if any) of the corporation that's paying you. If you are
the owner or an officer of the corporation, then you are supposed to be
paid via the W-2 route, but there are numerous "workarounds" -- consult
your CPA.


Joe Schrengohst
Contract Technical Writer
Cisco Systems
Network-to-Users BU
170 West Tasman Drive
San Jose, CA 95134
E-Mail:  jschreng -at- cisco -dot- com
Cisco Phone:  (408) 527-9844
Cisco Fax:        (408) 527-1488
Home Phone:  (775) 782-4129
Home Fax:        (775) 782-5585

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