It’s a holiday week, so I’m re-posting popular stories from the past. New material resumes next Tuesday, December 1.
This post from nearly 2 years ago is one of the most-popular stories I’ve ever done. It’s about issuing 1099s to veterinarians. The IRS released guidance about this 2 years ago and it’s caused a stir among quite a few accountants and businesses.
Originally published January 20, 2014
It’s 1099 season! Typically a 1099 must be issued by a business that pays $600 or more to a person who provides contract labor or services to the business during the year.
An exception applies to payments made to corporations. Generally, payments to corporations do not require the issuance of a 1099. There are two exceptions to the “no 1099 to a corporation” rule:
- Payments made to law firms. Law firms must receive a 1099 for payments made for legal services in excess of $600.
- Payments made for medical services.
How about payments made to veterinarians? Do veterinarian services fall under the definition of “medical services?”
According to the IRS, the answer is … yes. Per Letter Ruling 201349013:
Generally, yes. Payments made by a taxpayer in the course of the taxpayer’s trade or business to an incorporated veterinarian must be reported to the IRS to the extent the payments aggregate to $600 or more per year. Incorporated veterinarians are not exempted from the reporting requirement by Treas. Reg. Sec. 1.6041-3(p)(1) because veterinarians are “engaged in providing medical and healthcare services” for the purposes of Treas. Reg. Sec. 1.6041-3(p)(1).
To be clear: this only applies to BUSINESSES (and not-for-profits) that make payments to veterinarians in the course of conducting business (so farmers, ranchers, pet stores, zoos, etc.). Private citizens who take the family pet to the vet don’t need to issue a 1099 to the vet.
It may seem strange to think that veterinarians would fall under the definition of “medical and healthcare services,” but the IRS says it’s consistent with prior rulings in which the phrase “medical and healthcare services” is not necessarily limited to services performed on humans:
Congress and the IRS have historically included veterinarians in the field of medical and healthcare services, and specifically excluded veterinarians when exclusion was intended. For example, in Rev. Rul. 91-30 the IRS determined that veterinarians are in the “field of health” and should be included within the meaning of “similar healthcare providers” akin to doctors, nurses, and dentists, for purposes of defining a Personal Service Corporation. As an example where Congress intended to exclude veterinarians from a consideration of what is considered “medical, Congress specifically limited the definition of “medical device” in IRC Sec. 4191(b)(1) to devices “intended for humans.” Under Treas. Reg. Sec. 1.6041-3(p)(1) the language does not limit the terms “medical” or “healthcare” to services intended to treat humans. Accordingly, we conclude that a corporation providing veterinary services is “engaged in providing medical and healthcare services,” for purposes of Treas. Reg. Sec. 1.6041-3(p)(1), and is therefore not excepted from the information reporting requirement of IRC Sec. 6041 as a corporate payee.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”