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Level 1

Recording contractor expenses

We are a market research company that recently started to hire independent contractors to evaluate restaurant customer service.  While we reimburse the IC's for their meal purchases, we don't plan to include those amounts as income on their 1099's.  Instead, we typically record reimbursed IC expenses (travel, hotel, etc.) as a direct company expenses.  However, I believe that if I record an IC's reimbursed meal as a company expense, I would only get to deduct 50% of the expense per IRS regs.  Is there a different way to record the expense so I get the full deduction?  FYI, our client pays a flat fee for each restaurant evaluation and they don't reimburse us for the meal expense.  

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Best answer March 03, 2020

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Level 15

Recording contractor expenses


@bigfootz wrote:

We are a market research company that recently started to hire independent contractors to evaluate restaurant customer service.  While we reimburse the IC's for their meal purchases, we don't plan to include those amounts as income on their 1099's.  Instead, we typically record reimbursed IC expenses (travel, hotel, etc.) as a direct company expenses.  However, I believe that if I record an IC's reimbursed meal as a company expense, I would only get to deduct 50% of the expense per IRS regs.  Is there a different way to record the expense so I get the full deduction?  FYI, our client pays a flat fee for each restaurant evaluation and they don't reimburse us for the meal expense.  


The IC you hire is supposed to be in business for themselves, as such they have business expenses.

 

they in turn bill you for their services, which typically includes, materials, mileage, meals, and mark up.  Then you pay the bill using an expense account mapped to the 1099 block 7.  This bill is a paper trail you need to substantiate the expense in an audit.

 

If you are going to pay their meals, then you must get the original receipt to claim it as an expense for your company.  Your having the original receipt means the IC will not also claim the expense.

 

There are other requirements involved with insuring that an audit will uphold your relationship to the contractor as being independent - see the attachment.

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QuickBooks Team

Recording contractor expenses

Happy Monday, @bigfootz.

 

I hope all is well. Allow me to be your guide on recording expenses in QuickBooks Online. The expenses will help you keep track of who you paid and what you paid. The steps below will show you how:

 

  1. Go to the + New button and choose Expenses.
  2. Select a Payee, Payment Account, date, method, and category.
  3. Enter an amount for the expense.
  4. Press Save and Close.

Now you'll be able to enter expenses for your Independent Contractors. As for getting the full deduction, I recommend getting in contact with your accountant for the best solution. They'll be able to tell you how to record the expenses to get the best deduction out of them. 

 

Feel free to drop a line below if you have any other questions. Best wishes!

Highlighted
Level 15

Recording contractor expenses


@bigfootz wrote:

We are a market research company that recently started to hire independent contractors to evaluate restaurant customer service.  While we reimburse the IC's for their meal purchases, we don't plan to include those amounts as income on their 1099's.  Instead, we typically record reimbursed IC expenses (travel, hotel, etc.) as a direct company expenses.  However, I believe that if I record an IC's reimbursed meal as a company expense, I would only get to deduct 50% of the expense per IRS regs.  Is there a different way to record the expense so I get the full deduction?  FYI, our client pays a flat fee for each restaurant evaluation and they don't reimburse us for the meal expense.  


The IC you hire is supposed to be in business for themselves, as such they have business expenses.

 

they in turn bill you for their services, which typically includes, materials, mileage, meals, and mark up.  Then you pay the bill using an expense account mapped to the 1099 block 7.  This bill is a paper trail you need to substantiate the expense in an audit.

 

If you are going to pay their meals, then you must get the original receipt to claim it as an expense for your company.  Your having the original receipt means the IC will not also claim the expense.

 

There are other requirements involved with insuring that an audit will uphold your relationship to the contractor as being independent - see the attachment.

View solution in original post

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Level 1

Recording contractor expenses

Thanks Rustler!

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