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reporting contract labor on schedule C / 1099MISC

    • 4 posts
    April 8, 2009 9:59 AM EDT
    Greetings--

    I hope this is in the right forum!

    This is the first year I paid third-party independent consultants to do work for me. One consultant is a sole proprietor (with an SSN), the others are corporations (with tax IDs).

    I submitted a 1099MISC to the sole proprietor and to the IRS in February. I was told, however, by the corps that I should not submit a 1099MISC for them, and the instructions for 1099MISC also say "Payments for which a 1099-MISC is not required include: Generally, payments to corporations." (These corps I deal with don`t fall into any of the other excepted corporation types.)

    However, the 1040 SC instructions also say, "You must file 1099-MISC to report contract labor payments of  $600 or more during the year."

    My question is: What happens to the payments I made to corporations? I didn`t file a 1099MISC for them, but it sounds like the IRS expects line 11 to match up with the totals for all the 1099MISC forms I sent it (one, in my case).

    Initially I thought the payments to corps would be contract labor. Per the instructions for Schedule C (line 11): "Contract labor includes payments to persons you do not treat as employees (for example, independent contractors) for services performed for your trade or business."

    However, now that I look around the other choices, I wonder. Would these be "legal and professional services," line 17? Per the description in the instructions, it sounds like this is only for fees for accountants and attorneys.

    If it helps, the work is sporadic and short-term (one week) software training/mentoring, performed by a variety of "experts" in the field, people who I partner with. These could never be considered as employees by any definition I`ve read.

    Many thanks in advance!
    Jeff

    • 4 posts
    April 8, 2009 11:00 AM EDT
    Hi Ken,

    Many thanks for the (rapid!) response. Just to make sure I`m clear, when you say payments to a corporation are exempt," you mean with respect to reporting them on 1099MISC. I still need to report the payments to the corps (otherwise I get stuck with the taxes on that income), so you are also saying to lump it into line 11, correct?

    The concern I have is that it sounds like IRS is setting us up with a great way to get audited--I`ve heard that this is one of the trigger areas, when reported 1099MISC amounts don`t match what`s reported (at least on the recipient`s side of the fence).

    Regards,
    Jeff
    • 4 posts
    April 8, 2009 11:52 AM EDT
    excellent, thanks! And yes, that`s a legitimate hour spent.
    • 4 posts
    April 9, 2009 5:14 AM EDT
    Good thought Steve. I`ll follow that formula next year.

    Jeff
    • 434 posts
    April 8, 2009 4:42 PM EDT
    My tax guy has a simple formula - when in doubt, 1099 them.  He issues a 1099 to anyone we hire - even a corporation with an invoice.  You have nothing to lose by reporting what you paid, but the contractor better be reporting the income....

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    Steve Mann
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    MannMade Digital Video
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