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LuzBeaty
March 21, 2019
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1099 for independent contractor

  • March 21, 2019
  • 1 reply
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Hello, Should I include in box 7 the expenses reimbursed to the independent contractor? note that the contractor paid for expenses such as lodging, air tickets and sometimes visa, and our customer pays for that and when we make the payment to the contractor we reimburse him those expenses. What about the PER DIEM that our customer covers and we include in the payment to the contractor?  If that needs to be included,  how can I split the payment (daily fee and expenses) from the bills in QB? Please note that we will have only 1 banking transaction for the payment for matching with the bill. 

 

Thanks a lot for your support!

    Best answer by john-pero

    You don't have to split the payment as long as you split the bill. The key here is having separate accounts for what is and what is not to be tracked. 

     

    An example. I have a vendor that performs appliance repair but we also purchase used appliances from him. The appliances themselves are or can be a separate expense under repairs and maintenance subject to de minimis safe harbor where we can up from expense appliances for our apartments up to $2500 per line item. These appliance purchases do not have to be included in the 1099 to him (although he said go ahead and include it). To exclude these "repairs" I would have a separate expense account for appliances subject to safe harbor as a sub account or repairs. and when running the 1099 wizard, exclude that account form this contractor - then only the actual repair jobs would be included.

     

    In your situation you should enter a bill from the sub contractor that segregates their labor from airline tickets or other reimbursements. Do it at the bill level, then pay the bill and you do not have to worry about it at the check level. In the end it is all the same but does create a better workflow and paper/digital trail

    1 reply

    john-pero
    john-pero
    March 21, 2019

    Although technically a 1099 like this is supposed to only be for services, i.e. labor there is nothing wrong with including 100% of what you pay the contractor on the 1099. It is up to them to keep track of their own offsetting expenses

    L
    LuzBeatyAuthor
    March 21, 2019

    Thanks @john-pero for your prompt reply.

    I was searching about this and you are right.  I checked in IRS, fringe benefit guide, and reimbursements such as travel expenses (loading, air tickets, etc.) and per diem can be excluded by the company when filling out the 1099 for the independent contractor under an accountable plan. If the company does not want to have an accountable plan, the total payment needs to be included in the 1099 and it is up to the contractor to deduct them on their own tax return.

    Our company will exclude them from the 1099, because we will ask the independent contractor to follow an accountant plan (i.e provide documentation that expenses are business related and bills/receipts). 

    Could you please help me to identify how I can split in QB the service payment and travel expenses and per diem? As I said above, we will make only 1 transfer for the payment from the business bank account. I will create bills in QB, and I am wonder if the payment can be split there, so when I am ready to issue the 1099, only the fees for their services are included in box 7.

     

    Thanks a lot for your ongoing support. 

    john-pero
    john-peroAnswer
    March 22, 2019

    You don't have to split the payment as long as you split the bill. The key here is having separate accounts for what is and what is not to be tracked. 

     

    An example. I have a vendor that performs appliance repair but we also purchase used appliances from him. The appliances themselves are or can be a separate expense under repairs and maintenance subject to de minimis safe harbor where we can up from expense appliances for our apartments up to $2500 per line item. These appliance purchases do not have to be included in the 1099 to him (although he said go ahead and include it). To exclude these "repairs" I would have a separate expense account for appliances subject to safe harbor as a sub account or repairs. and when running the 1099 wizard, exclude that account form this contractor - then only the actual repair jobs would be included.

     

    In your situation you should enter a bill from the sub contractor that segregates their labor from airline tickets or other reimbursements. Do it at the bill level, then pay the bill and you do not have to worry about it at the check level. In the end it is all the same but does create a better workflow and paper/digital trail

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