Discussion:Independent Contractor Expenses

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Discussion Forum Index --> Basic Tax Questions --> Independent Contractor Expenses


Discussion Forum Index --> Tax Questions --> Independent Contractor Expenses

Rgpiii (talk|edits) said:

5 September 2010
An independent contractor, receiving 1099 income has both reimbursed and unreimbursed expenses for travel, car rental, lodging and meals incurred on behalf of one client. The reimbursed expenses are included in the 1099 income. Should both reimbursed and unreimbursed expenses be lumped together as Schedule C Part 2 Expenses, or should reimbursed expenses be listed separately under Part 1, Cost of Goods Sold (line 39) "other costs"?

Thank you.

TOrahaCPA (talk|edits) said:

5 September 2010
Reimbursed expenses usually apply to employees when there is an accountable plan, and they are not taxable.

"reimbursed expenses" for independent contractors is income reported on form 1099. Then the IC can deduct whatever expenses allowed. To answer your question it depends what the expenses are for. If they are of the type of expenses you put Schedule CPart 2 then put them there. If they're of the type that are related to cogs "other costs" then put them there. I would not put a category of expenses called "reimbursed expenses", I would list out the expenses whether reimbursed or unreimbursed.

Rgpiii (talk|edits) said:

8 September 2010
Where the IC has both reimbursed and unreimbursed meal expenses....

Shouldn't the reimbursed meal expenses be fully deductible and the unreimbursed expenses be 50% deductible? If so, how do I show that?

Smokeytax (talk|edits) said:

8 September 2010
Rgpiii - I think you're right. If the client was billed for meals separately, the client should not have included them in amount on the form 1099-Misc, and the client should be subjected to the 50% reduction, not the independent contractor.

But, if they did show up on the form 1099 by mistake, listing them separately as fully deductible "reimbursed expenses" would do the job. But, they're not really "goods", are they? Maybe the other expenses section of the Schedule C would be better, with the description "reimbursed expenses".

Only the independent contractor's unreimbursed meal expenses should be subjected to the 50% reduction.

Dap19 (talk|edits) said:

8 September 2010
Rgpiii and Smokeytax - I disagree with the handling of meals. The amount billed by the IC in full (including the meals) is the amount that goes on the 1099 as payment for services rendered. The IC is then subject to the 50% reduction. The client did not incur the meal expense and does not have the records necessary to prove who was there, the business purpose, etc. The client gets the full deduction for the amount paid to the IC and it is expensed or capitalized according to the services provided.

Seaside CPA (talk|edits) said:

8 September 2010
See Publication 463. It explains when the independent contractor can take the full deduction for the meals.

Rgpiii (talk|edits) said:

8 September 2010
Seaside I think you nailed it. Pub. 463, page 32...IC receives an allowance for meals, but does not account to client for them, so 50% limit does apply IMO.

Thanks all.

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