1099s Question

[Maria]

Hi, I just had a talk with a client's outside bookkeeper. He said he has been told by many CPAs that reimbursed expenses(such as mileages) are not part of 1099. Actually that is not what we have been doing. I appreciate any clarification.

[Bees Knees]

If it is part of an accountable plan, you don't put the reimbursements on a 1099. If it is part of a non-accountable plan, you put the reimbursements on a 1099.

TTB, page 8-11 describes the rules that apply to accountable verses non-accountable plans.

[Maria]

I can be wrong, I recall accountable and nonaccountable plan have something to do with employee reimbursements. We are issuing 1099s to independent contractors who are not employees. Thanks anyway I will look into the IRS website.

[Kram BergGold]

Disagree with Bees

The way I have read the instructions for 1099 forms, reimbursements are included in the income. Accountable/non accountable only pertains to an employer/employee relationships I believe.

[rgtaxservice]

1099 for ICs

If it's an IC then there is no reimbursement. It's included as compensation on the 1099. The IC is the one the makes the mileage deduction.

[JG EA]

1099 also

Pub 463 flowchart in asking the question is the expense subject to 50% rule: Notice the "if self employed" and the "Form 1099".

"Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer did not include in box 1 of your Form W-2. If self-employed, count only reimbursements from clients or customers that are not included on Form 1099-MISC, Miscellaneous Income.) .....


Notice the "as other taxable income"

"Your meal and entertainment expenses are NOT subject to the 50% limit. However, since
the reimbursement was not treated as wages or as other taxable income, you cannot
deduct the expenses."

Accountable plan just means you account for it. It is not limited to employees.

[Kram BergGold]

Reread instructions

I printed out the 2007 1099 MISC instructions and it is not clear on this subject. It says you include fees and non accounted for travel reimbursements. It makes no mention of other reimbursements. However it does say if an insurance company gives an auto body shop a fee that incldues parts and labor the 1099 should include both.
If I get a $5,000 fee and a $2,000 reimbursement and have given the receipts to the payor (accountable) and I only show $5,000 as income and get audited and the IRS finds the $2,000 in my bank account then what? Isn't it better to include everything and give the payee a letter saying "$2,000 was reimbursements so claim a deduction for reimbursements included in income".

[Maria]

It Makes Sense

Hi, I think it makes sense that EVERYTHING should be included in the 1099-MISC. To exclude "reimbursements," It will be burdensome for the issuer to identify "service" and "reimbursement," i.e. figuring out the net profit for the independent contractor. However, the IC should be in a better position to figure out his/her net profit on the Schedule C. Thanks so much.

[JohnH]

Additional info

I think it's a good idea to send the I/C a printout of the payments that are reported on the 1099-Misc. I stick the list in with the 1099-Misc.

This helps in two ways. 1) If they are not sure whether reimbursements are in the total, they can refer to the list; and 2) If they start complaining that they didn't receive all that money, you can tell them to let you know which of the checks on the list they didn't get.