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Handle pass-through expenses.

I am a sole proprietorship and have a  PR service business.  I have a subcontractor that I'm using but am not marking his services up for my client.  I am the pass-through.    I am worried his services are inflating my taxable income and showing me with a higher income than I am actually receiving, or that the government is taxing me and also taxing my subcontractor.

 

Do I need to open up an S-corp to avoid this?

Where do I denote my expenses like this in my tax forms?  

Am I required to submit to my subcontractor a 1099 at the end of the year?

 

 

(Title has been edited by moderator for clarity)

 

 

Solved