Should 1099s Be Sent to Incorporated Medical Service Providers?

Previously, payments made to incorporated medical providers (such as those operating under an S Corporation or C Corporation) were generally exempt from 1099 reporting. Under a new rule, businesses must now issue Form 1099 for payments of $600 or more to medical service providers, regardless of their incorporation status. Incorporated medical providers would receive a 1099-Misc with payments reported in Box 6. More information can be found below and on the IRS website at https://www.irs.gov/pub/irs-pdf/i1099mec.pdf on page 6 of the publication.

Businesses that pay medical professionals for services—such as employee medical exams, drug testing, workers’ compensation assessments, or any other medical services—may now need to issue a 1099-MISC (Box 6) or 1099-NEC (if paid as compensation) to those providers. As of today, there is a lack of clarity in IRS publication directives for the correct 1099 form to submit for unincorporated compensation. Intent matters, so move forward with submitting one of the forms listed and look forward to more clarity in the future.

Common Examples Include:

✅ Occupational health providers for pre-employment physicals
✅ Doctors or clinics performing workers’ compensation evaluations
✅ Third-party medical testing labs
✅ Any healthcare provider paid $600 or more for services

Since this rule is new in 2024, businesses that quickly act to correct any missing 1099s may be granted leniency by the IRS. The IRS often takes a reasonable approach with compliance changes, especially when businesses show good faith efforts to correct mistakes. Filing late is better than not filing at all.

If a business fails to file 1099s on time, the IRS may impose penalties based on the delay:

Filed within 30 days after the due date: $60 per form, up to $630,500 max per year
Filed by August 1: $120 per form, up to $1,261,000 max per year
Filed after August 1 or not filed at all: $310 per form, up to $3,783,000 max per year
Intentional disregard of filing requirements: Minimum $630 per form, no cap

(Small businesses with gross receipts under $5 million face lower maximum penalties, but the per-form penalties remain the same.)

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Should 1099s Be Sent to Incorporated Medical Service Providers?

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