I have an LLC real estate agency client that operates under a national brokerage. The brokerage handles all payment and reporting of commission payments to the LLC team realtors. Two of those team realtors are also employees of the LLC. Mid-year, the LLC decided to reimburse the 2 employee realtors for the commission withheld by the brokerage by direct check, not as part of their paychecks.
Q1: How do I treat those reimbursements for tax purposes... I assume it's taxable income? Q2: Assuming it is taxable income, do I report it on the W2 (even tho it was paid outside of payroll & no taxes were withheld), or on a 1099? If a 1099, is it a 1099-MISC or 1099-NEC? Q3: What is the best way to handle this going forward for 2021?
