How to track expenses that contractors incur. The company pays the bill for the expenses incurred and deducts theses expenses from the contractors check.

Hey there, @almir93.

Thanks for joining the Community. I'm here to share some information about tracking the expense your contractors incur in QuickBooks Online (QBO).

To start off, make sure to select an expense account when paying something on behalf of your contractor. Then, use this account with a negative amount so it'll be deducted to the total of their check. Here's how:

1. Go to the Plus icon, then pick Expense under Vendor column.
2. On the Payee drop-down, choose who you want to pay.
3. On the Category details section, select an expense account on the Category, then enter a description and amount.
4. Click Save and close.

To pay your contractors, here's how:

1. Go back to the Plus icon and pick Check this time.
2. Choose your contractor on the Payee drop-down.
3. On the Category details section, select that expense account you used earlier with a negative amount.
4. Save and close.

Once done, you can pull up the Expenses by Vendor Summary report to track those expenses. Here's how:

1. Go to the Reports menu at the left pane.
2. Enter Expenses by Vendor Summary on the search bar.

For future reference, you can also check out this article for more information: Customize vendor reports.

This should answer your concern for today. Please let me know how it goes or if you have any follow-up questions so I can get back to you. I'm always here to help. Wishing you and your business continued success!

@almir93 

A contractor is in business, he has expenses and he has income. He bills you for his expense plus his mark up (just as you do for your customers), you pay the bill and that is his income.

What you pay him, the total paid in cash or check, is reported on the 1099-misc block 7

Paying his expenses, in an audit could be a problem, the auditor may easily find that doing so makes the contractor an employee, and you would then be liable for back payroll taxes, plus  penalties and interest, state and federal.

see the attachment, item 13 applies, the IRS holds a hard line on what is and is not an independent contractor