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Level 2

1099 Contractor Expense Reimbursements

My 1099 contractor submits bills for expenses and hours separately to me. Should I record each transaction in the appropriate expense category and issue a 1099 for the whole amount for the contractor to take care of deducting expenses on their own or should I be treating the two types of transactions differetly? I would appreciate any help with this. Thanks!

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Best answer January 04, 2020

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Level 15

1099 Contractor Expense Reimbursements

This subject can start discussions

 

The crux of the matter is who has the expense receipts - if you get them, then you are reimbursing the expense and it is not 1099 reportable.

 

if the contractor keeps them as his expenses, then the whole amount you pay him is 1099 reportable

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Highlighted
Level 15

1099 Contractor Expense Reimbursements

This subject can start discussions

 

The crux of the matter is who has the expense receipts - if you get them, then you are reimbursing the expense and it is not 1099 reportable.

 

if the contractor keeps them as his expenses, then the whole amount you pay him is 1099 reportable

View solution in original post

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Level 1

1099 Contractor Expense Reimbursements

How do I record a non-taxable reimbursement for a contractor? I do not use Quickbooks Payroll.

 

I understand properly recording the taxable 1099 wages, but I don't know how to record non-taxable reimbursement items. In example - I have an 1099 Independent Contractor, who earned $15k but their 1099 states an taxable income of $18k. The $3k difference is a non-taxable payment as it was an reimbursement.

 

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QuickBooks Team

1099 Contractor Expense Reimbursements

Thanks for dropping by the Community, @Darshane.

 

You can create a new expense account for your non-taxable reimbursement. Let me walk you through how.

 

  1. Go to Accounting, then Chart of Accounts.
  2. Select New. Then, choose "Expenses" or "Other expense" as Account Type and enter the Account details.
  3. Click Save and Close.

After that, record the reimbursement using that account.

  1. Go to +New, then Check.
  2. Look for the account you've just created under Category column, enter other information on the field.
  3. Click Save and close.

With these steps, you'll be about to record the reimbursement without including it on the 1099 mapping. You can learn about the different pay methods for contractors at this link: Pay Methods For Employees Or Contractors.

 

I've also added these links below that I'm sure you'll find helpful. These resources will guide you on providing services to your contractor.

That'll do it. Feel welcome to come by anytime if you have other questions or concerns. We're always here to help you every step of the way. Have a great weekend.

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Level 1

1099 Contractor Expense Reimbursements

can you please elaborate on this? what expense account do i add?

i have a contractor who does work for me but buys supplies with his own cc. he submits invoices to me with labor and supply costs. i'm not sure how to enter it into QB so that the labor reimbursements don't appear as income on the 1099 form. or should they? 

is it his responsibility to deduct them? 

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Level 1

1099 Contractor Expense Reimbursements

can you elaborate on this please?

when you say add a new account and then enter the details... what details?

I have a contractor who does work for me but buys supplies with his own cc. he submits invoices to me with his labor time and the supplies for reimbursement, which i pay him for.

i'm not sure how to enter these payments into QB without the supply reimbursements showing up as income. or should they?  

help. thanks!~

 

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Level 1

1099 Contractor Expense Reimbursements

Please keep in mind I am not an accountant but this removed the non-taxable expenses from my contractor's 1099 report. I use QB Desktop (19)

 

Go to Lists > Chart of Accounts > Account (icon at bottom) > New

Choose Expense > Continue

 

Enter Account Name - I named mine EE Non-Taxable Reimbursement and entered mine into the sub-account of Independent Contractors, but keep in mind it might not be the same for you depending on how you're charting your contractors. I also add a description so future-me would know what to use it for.

 

Tax-Line Mapping - now here was the tricky part that I may have gotten wrong. I need the items to either not show up on a 1099 as taxable income or be put in Box 12: Code L (Non-Taxable Reimbursements for EE Business Expense) so it won't affect my contractors. I could not find ANYTHING after over an hour of research regarding what the tax line mapping items mean or how they reflect on a W-2 or 1099.

So.... I used UNASSIGNED - if you know the correct one PLEASE for the love of Pete let me know.

 

Regardless - this worked and removed the non-taxable expenses I had paid to the contractor. I re-ran their expected 1099 report for this year and the expected total was correct. I also want to note that the transactions re-itemized using the EE Non-Taxable Reimbursement were easily located in the Chart of Accounts, so if I screwed it all up at least it will be easy to locate to correct. 

 

Also as a note - you will need to go back through every single invoice/bill made to the contractor in question and re-assign the account it was under for ones you don't want recorded as taxable income. Meaning the invoice was originally under an account for office supplies and I changed it to the EE Non-Taxable one that I made.

 

ANYONE who knows what they are doing regarding this please correct me if I've done anything incorrectly.

 

 

Highlighted
Level 1

1099 Contractor Expense Reimbursements

Please keep in mind I am not an accountant but this removed the non-taxable expenses from my contractor's 1099 report. I use QB Desktop (19)

 

Go to Lists > Chart of Accounts > Account (icon at bottom) > New

Choose Expense > Continue

 

Enter Account Name - I named mine EE Non-Taxable Reimbursement and entered mine into the sub-account of Independent Contractors, but keep in mind it might not be the same for you depending on how you're charting your contractors. I also add a description so future-me would know what to use it for.

 

Tax-Line Mapping - now here was the tricky part that I may have gotten wrong. I need the items to either not show up on a 1099 as taxable income or be put in Box 12: Code L (Non-Taxable Reimbursements for EE Business Expense) so it won't affect my contractors. I could not find ANYTHING after over an hour of research regarding what the tax line mapping items mean or how they reflect on a W-2 or 1099.

So.... I used UNASSIGNED - if you know the correct one PLEASE for the love of Pete let me know.

 

Regardless - this worked and removed the non-taxable expenses I had paid to the contractor. I re-ran their expected 1099 report for this year and the expected total was correct. I also want to note that the transactions re-itemized using the EE Non-Taxable Reimbursement were easily located in the Chart of Accounts, so if I screwed it all up at least it will be easy to locate to correct. 

 

Also as a note - you will need to go back through every single invoice/bill made to the contractor in question and re-assign the account it was under for ones you don't want recorded as taxable income. Meaning the invoice was originally under an account for office supplies and I changed it to the EE Non-Taxable one that I made.

 

ANYONE who knows what they are doing regarding this please correct me if I've done anything incorrectly.

 

 

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