From time to time, I have to pay another guy to do some work for me when I'm overloaded. This would be a 1099 situation (that's a subcontractor right?) so should I just create an expense account called "subcontractors" or something like that?
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I can provide you some information about COGS in QuickBooks Desktop.
Costs of Goods Sold, or COGS tracks all of the costs associated with the items you sell, which allows you to calculate gross profits accurately.
COGS accounts also give the total underlying costs on your Profit & Loss reports. In QuickBooks, you create new accounts through the Chart of Accounts, or COA, window. You then assign the necessary inventory items to these accounts so that you can accurately track what you have in stock, and know exactly how much you've spent and earned with it.
You might find this article helpful: https://quickbooks.intuit.com/community/Inventory-and-projects/Understand-Inventory-Assets-and-COGS-....
If you require more information about COGS, feel free to let me know. Have a great rest of your day.
I was hoping you could assist me. We currently use Subcontractor labor set up as a service type/item with the expense account set up COGS-subcontractor and income account 4520 Revenue-labor, we set up estimates and invoice the client directly from that in QB however the cost of the Subcontractor labor does not reflect on the job when the job profitabiity detail report is ran for this job, but on the job estimates vs. actuals detail report the cost shows, what needs to be done so that the cost reflects properly on the job profitabiity detail report?
(using QB Enterprise 2016 Contractor)
We have an independent contractor who's payments have been entered under a current liability account. Im assuming because of this, he was not eligible for a 1099.
Is this correct, or should the account be changed to an expense?
It’s nice to see you in the QuickBooks Community, Jalise.
I’m here to clarify why your vendor isn’t eligible for 1099.
Yes, you’re correct once you use a different account to record vendor payments the transactions will not be tracked as 1099. Aside from that, the contractor should reach the $600 threshold.
To resolve the issue, you’ll have to associate an expense account for each 1099 category and choose the correct one you set up in QuickBooks to track 1099 payments.
To change the account:
I'm adding some articles with detailed instructions on how to troubleshoot issues when preparing 1099.
If you have further questions about the process, reach out to me by mentioning my name. I’ll get back to assist you further. Have a good one.
Thanks for that Risa-LilaM.
So, here is my issue. We received money from a funder and they requested we pay the independent contractor from the funds they gave us. In doing so, it was recorded as a liability instead of an expense. The contractor received well over $600 last fiscal year, but because of how it was recorded, he didn't get a 1099. How should he go about paying his taxes for last year?
Please learn from this input; you can Map a Liability account and even an Asset account for purposes of 1099 reporting. Example: The contractor works on Equipment you track as Fixed Asset or the Business Building = for purposes of 1099-Misc reporting, that is mapped to box 7. That labor is not Expense, but invested costs.
This is likely where you went wrong: "We received money from a funder and they requested we pay the independent contractor from the funds they gave us."
First, we know it isn't literally the same serial number dollar bill that you get, and then pay out. Next, you treat it as Income when that is Your Resource to spend. Any restriction on it makes it Restricted Income; not Liability. It would be Liability if you must use it as promised or Return it.
"In doing so, it was recorded as a liability instead of an expense."
That part is backwards; the Payment to the contractor is still expense or whatever applies. The Funds you were given, if they were in fact not yours to keep and use, but subject to being returned, means the Payment to the contractor still is whatever you paid for that they provided. Then, additional to that Spending, you were supposed to Relieve Liability to Income, to show you earned the right to Keep that funds, because you Spent them as promised.
What you did is Wash Away the grant entirely, which is wrong.
"The contractor received well over $600 last fiscal year, but because of how it was recorded, he didn't get a 1099."
And that is wrong, as well.
Let's review the options for proper accounting of these activities:
1. I get Grant Income, under Restriction, to use only on the Specific Purpose. That is my income when I got it, and my spending is associated with that Job (customer = grantor) and/or Class (program/purposes, such as Food Bank or Animal Rescue).
2, I am awarded a Reimbursement Grant, so the Spending happens first, and then I apply to be reimbursed, which makes the Reimbursement my Grant Income.
3. I get a Restricted Grant that has the stipulation that Funds not Expended must be returned. That means it is more like a combination of 1 + 2. I treat the initial inflow as Liability. I track all spending and mark that this is Billable to the Grantor. I invoice the Grantor and then I use the Prepayment item on a Credit Memo to apply it to the invoice. The Invoice is creating the Income. There is not a Payment of new money against that invoice; the credit memo is how I show the Liability is reduced, and I am using the prepayment to clear the Invoice, to show I have the right to Keep the initial funds (reducing liability = the amount I need to repay just went down). I do that until I spent the grant in full, and the Liability from the prepayment of the grant is fully cleared to 0 liability on hand.
And for Every scenario, if I paid the subcontractor for goods or services, the entries are all the same as usual = really entered for what I am paying that person for doing or selling to me. Nothing about the Purchase is Liability. I spent funds; the earlier options control what I need to Treat the inflow of the funds as, in the first place.
In QuickBooks Online, most of the vendor/contractor payments are categorized in box 7. To check which boxes these vendor payments belong to, you can follow these steps:
You can also check these article for more information:
We'll be around if there's anything you need help with QuickBooks. Thanks.