How to file 1099 Real Estate Commission to a commercial brokerage? NEC vs MISC confusion

Thanks for explaining this! Quick question - does it matter if the brokerage is an LLC or corporation? I heard somewhere that you don't need to send 1099s to corporations, but I'm not sure if that applies to real estate brokerages specifically.

Great question! Generally, payments to corporations are exempt from 1099 reporting requirements, but there's an important exception for real estate transactions. Even if the brokerage is structured as a corporation, you still need to issue the 1099-NEC for real estate commissions. This is one of those special carve-outs in tax law that trips up a lot of people. The real estate payment exception specifically overrides the corporation exemption. So regardless of how the brokerage is organized (sole proprietor, LLC, or corporation), you need to issue the 1099-NEC if they provided real estate services and you paid them $600 or more during the year.

Does it actually help with filing the forms too, or just tell you which ones to use? I've got about 15 different contractors I need to issue 1099s for this year and I'm dreading the process.

I'm skeptical about these tax tools - can it really understand complex situations like when you have mixed payments (some for real estate commissions and some for other services) to the same vendor? That's where I always get confused.

It doesn't file the forms for you, but it gives you step-by-step instructions on exactly how to complete them correctly. For your situation with 15 contractors, it would help you determine which ones actually need 1099s (because not all contractors do) and specifically which form each one needs based on the type of payment. For mixed payment situations, that's actually where it really shines. You can describe the different payment types you made to the same vendor, and it'll break down how to properly categorize each portion on the correct forms. In my case, I had both property management fees and repair reimbursements to the same company, and it correctly identified which went on which form and which portions didn't need to be reported at all.

How does this actually work? Do they somehow have a special line to the IRS or something? The last time I tried calling, I was on hold for 2+ hours and then got disconnected.

This sounds like BS honestly. Nobody can get through to the IRS these days. I tried calling about 8 times last filing season and never got a human. If there was some magical way to skip the queue don't you think everyone would be using it?

No special line - they use a combination of automated technology and real people to navigate the complex IRS phone system on your behalf. They call the same number everyone else does but have optimized the timing of calls and know exactly which options to select in the phone tree to maximize your chances of getting through. They essentially wait on hold in your place, then call you when they've reached a human. I was extremely skeptical too, which is why I included the video link so you could see it in action. The reality is the IRS is severely understaffed but they actually do answer millions of calls each year - it's just incredibly difficult to be one of the lucky ones who gets through. This service basically increases your odds significantly by handling the frustrating part for you. Last tax season was brutal for everyone trying to call in, but they still managed to get me connected in about 25 minutes when I'd previously wasted entire afternoons on hold.

Thanks for pointing this out! I have the brokerage's W-9 so I think I'm good on that front. The W-9 shows their business name and EIN, so I'll use that on the 1099-NEC. Was there any penalty when you had to reissue it to the correct entity?

I didn't face any penalties because I caught it early enough and issued a corrected 1099-NEC before any filing deadlines. The agent actually called me almost immediately after receiving it because they didn't want the income showing up on their personal return when it should go to the brokerage. As long as you're using the information exactly as it appears on the W-9 they provided, you should be fine. The W-9 is specifically designed to give you the correct information for tax reporting purposes. Since you already have their W-9 with the brokerage name and EIN, you're ahead of where I was!

That's seriously bad advice from your friend. Not filing required 1099s can result in penalties of $280 per form (for 2024), and if the IRS determines you intentionally disregarded the requirement, penalties can jump to $570 per form or more. The IRS computer systems automatically match income reporting, so when the brokerage reports the income they received on their tax return, the system will flag that they received income from you that you didn't report paying. That's an automatic red flag that can trigger further scrutiny of your returns. Plus, brokerages depend on receiving proper 1099s for their own accounting and tax filing. Not providing one creates problems for them and could damage your business relationship. It's just not worth the risk for something that takes a few minutes to do correctly.