I am an LLC owner who hired a contractor and when the customers' paid they gave a tip. How would one properly account for this if I agreed to pay the contractor $300 for each customer they have dealt with?
1. If the scenario is that each of the customers' have been paying $600 on the bill but were only supposed to give $500 and wanted the extra $100 to go to the contractor, do I just count $600 as income, and then instead of paying the contractor $300 as is stated in the contract, give $400 to the contractor and include that on there 1099-NEC?
2. If the scenario is that I later found out that each customer has paid the contractor a $100 tip in cash how do I go about that? If I count that extra $100 as income for my business and file the 1099-NEC as if he was paid the $100 each time and then just not pay the contractor that extra $100 since he received it in cash, the contractor could claim he never received the extra $100 from me and I could end up paying over $1000 after combining each of the customers the contractor has dealt with. Is there a better/correct way to go about this scenario?
