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Level 2

1099 setup for benefits paid on behalf of non employee

Our company pays expenses/benefits directly to vendors on behalf of a contracted consultant. The consultant operates under an LLC, however our accountant is telling me I need to issue a 1099 in the invidivuals name since we pay these expenses/benefits on his behalf. We also need to provide them with a detailed breakdown of these payments. First, how do I generate this 1099 if the expenses are attached to the vendor paid, not the individual. What type of 1099 form is used? What box do I need to show these payments? And are there any payments that should NOT be included? Car payment, auto insurance, gas, phone, life insurance, dental insurance.  

Secondly. We do issue a reimbursement for medicare directlty to the LLC. Do I need to 1099 this too?

4 Comments 4
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Level 15

1099 setup for benefits paid on behalf of non employee

this is the strangest set up I have come across, assuming this relationship is NOT your acting as a conservator or some other trust type of arrangement and you are indeed paying the consultant for services of some kind

 

Even though in real life you are paying third party vendors, you are in fact paying the consultant, and in QB that is how it it needs to be booked. The consultant is set up as a 1099 vendor, and you pay him using an expense account you map to block 7 on the 1099. Who you put on the pay to line of a payment is a different thing and will most likely mean you will need to hand write the checks.

 

I have no idea about the medicare issue, but I would suggest to you that if you are paying an accountant and he can not clarify things for you, then you either need a new accountant, or consult with a tax accountant, or both.

 

This is so strange, I suggest you contact a tax accountant locally that you can sit down with and explain the whole thing to.

 

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Level 15

1099 setup for benefits paid on behalf of non employee

I find this really strange, too. All of this:

"And are there any payments that should NOT be included? Car payment, auto insurance, gas, phone, life insurance, dental insurance.  

Secondly. We do issue a reimbursement for medicare directlty to the LLC. Do I need to 1099 this too?"

 

Is Personal. That is not Business-related. The Consultant charges you their reasonable rate and pays their own costs. You cannot be tracking those details like that as your breakdown of expense. You Pay that person, and all of this is Subcontractor Labor, is reported in Box 7. You do not break it down for them; you are not their bookkeeper running their personal or business life, in your own business records. Sheesh.

 

There is some violation of boundaries here, that would not go well if either party is audited by IRS or State, labor or worker comp. You should NEVER be paying anyone on this party's behalf, unless that is required by court order, such as Child Support.

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Level 1

1099 setup for benefits paid on behalf of non employee

In other words you don't know how to do this in QuickBooks.

 

This is a real situation.  Part of a sale agreement is that the seller will get medical/dental and phone as part of the deal.  This, and the interest expense/income of the loan should be taxable to the seller.

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Level 1

1099 setup for benefits paid on behalf of non employee

For the community, I figured out how to do this.

 

You first pay the vendor as normal, but you post it to a clearing account.  You then credit the clearing account via Journal and debt the regular expense account. In the "Name" area of the Journal, you put the name of the 1099 person that you have set up as a vendor. All of those charges are then collected on your yearly 1099's.

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