I have a client asking me to come and redo her 1099's because the
"contractors" think they need a higher 1099—one that includes their
travel and product costs reimbursements—and not just their labor.
I explained that I did it correctly. If your business ever needs help with filing 1099's, we're here to help you. I and my bookkeepers know how to prepare 1099's correctly. We also know how to make this easy, by managing it all year long, and doing the work for you.
I explained that I did it correctly. If your business ever needs help with filing 1099's, we're here to help you. I and my bookkeepers know how to prepare 1099's correctly. We also know how to make this easy, by managing it all year long, and doing the work for you.
Now these "contractors" for this one client are arguing it's just
a preference thing, and they prefer that the 1099's be higher. They are confused.
I'm a contractor, and what clients do or don't send me for a 1099 has zero effect on my accounting. As a business owner/contractor, I report my true income, deduct my true expenses, and pay taxes on my true profit.
1099's gained popularity with the government as a way of tracking down dead-beat parents who are trying to get out of child support. As a parent, I am responsible to my children, so if I had an objection it would be relative to privacy. As a contractor, 1099's are only a problem if the 1099's filed on my name overstate my true income. That could happen if everyone reported everything they paid me, including checks given to me at year end that I didn't deposit until the next year. One way to look at this is that it's in a contractors best interest if a business owner does not send them a 1099, or under-reports their income on a 1099. A better way to look at this is what difference does it make what someone else reports on a 1099, or even if they do? As a business owner/contractor, I report my true income, take my true expenses, and pay taxes on my true profit.
When contractors argue
for something as stupid as they want a higher 1099 from a single client, they're arguing to be employees. Employees get a
paycheck for their labor, and checks to cover reimbursements for
travel/production costs. Employees get a W2 at year end for their labor and no 1099 because you never issue a 1099 for reimbursements.
How 1099's are calculated is not a question of preference. However, the IRS let's business owners off the hook with confusion on what to report. In some cases the business owner really don't know what's what? The IRS example is when you take your truck to a repair shop. The repair shop may break out labor and materials on the bill, but you don't really know if they are marking up material costs or not? Therefore, do not worry about splitting the bill on your accounting system. It's fine to include the entire bill as part of the total for the 1099.
When you can't easily discern
what part of the bill is income to the contractor and what part is reimbursed costs, just report it all. But when you easily know, split the check on your accounting system, and don't report reimbursed expenses
on the 1099. It's not how the IRS wants it and it's not in the best interest of your contractors.
Here is a link to the IRS Code on 1099 filings. IRS Government Instructions for Filing a 1099
Here is a link to the IRS Code on 1099 filings. IRS Government Instructions for Filing a 1099
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