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Experienced Member

How to Categorize Independent Contractor Reimbursable Expenses

I have Independent Contractors who bill a flat fee for management each month.  One of them has a housing allowance we agreed to.  I fear to call it "subsistence" since she is Independent and not an Employee on payroll.  How do I categorize that to keep it all under the Independent Contractor hat, of sorts?  Right now I lump her $9,000/mth flat rate and her $3,000/mth housing allowance all under an Expense of Construction Manager.  

 

Then, two other distinct items that are a part of this Independent Contractor (and others I have) are that their bills may or may not include mileage to and from jobsites.  Or, I may have them buy (or usually purchase for them) a plane ticket now and then.  Should I keep these under a flat Construction Manager Expense or under "Travel" or "Mileage"?  

 

Thanks for any help.  

Solved
Best answer 06-20-2019

Accepted Solutions
Established Community Backer ***

Re: How to Categorize Independent Contractor Reimbursable Expenses

reimbursable expenses are for employee's

 

the IC has a business, and as such they have expenses.  Then they invoice you their customer and you pay it, that payment is 1099 reportable if you pay by check or cash (easy solution is to pay by paypal or a CC then you do not have reporting or tracking)

 

on their P&L income is reduced by expense.

 

IF, if you were to try to treat things as reimbursable expenses, You have to receive the original receipt so you can support that expense in an audit.

3 Comments
Established Community Backer ***

Re: How to Categorize Independent Contractor Reimbursable Expenses

reimbursable expenses are for employee's

 

the IC has a business, and as such they have expenses.  Then they invoice you their customer and you pay it, that payment is 1099 reportable if you pay by check or cash (easy solution is to pay by paypal or a CC then you do not have reporting or tracking)

 

on their P&L income is reduced by expense.

 

IF, if you were to try to treat things as reimbursable expenses, You have to receive the original receipt so you can support that expense in an audit.

Experienced Member

Re: How to Categorize Independent Contractor Reimbursable Expenses

Perfect.  Thank you.  And that is how the IC is set up, very carefully in California for legal reasons.  So just pay the total amount of their bill, no splits, and it all goes on their 1099.  

 

I suppose then if I pay for an airplane ticket for them, which is reimbursable to the client, then I just pay it as a travel expense and bill the client just specifically for that leaving the IC out of it.  

 

Thank you for help so quickly!

Experienced Member

Re: How to Categorize Independent Contractor Reimbursable Expenses

And, also, I realize the term I used as "reimbursable" to the client on the airfare but do understand it is technically not, it is expense and sales.  

 

Thanks again!