Discussion:Include Mileage on a 1099-MISC

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Tax Questions --> Include Mileage on a 1099-MISC


TimCPA (talk|edits) said:

3 January 2007
My client, a real estate agent, pays mileage to a few people for picking up signs and for general running. Should the mileage paid to these people be included on a 1099? Thanks.

JR1 (talk|edits) said:

January 3, 2007
Yes. They're independents, and however the money paid to them is computed, it's income. Up to them to figure out how to deduct expenses.

DZCPA (talk|edits) said:

3 January 2007
Only if paid over $600.

Lhhesscpa (talk|edits) said:

3 January 2007
DZ: I disagree. There is not a separate reporting threshold for reporting mileage payrments. -- Larry Hess, CPA, Albuquerque, NM - Talk to me

JR1 (talk|edits) said:

January 3, 2007
No, but the 600 reporting limit applies. The 1099 doesn't care if it's mileage, phone reimbursements, commissions, etc.

Lhhesscpa (talk|edits) said:

3 January 2007
JR: Are we saying the same thing? -- Larry Hess, CPA, Albuquerque, NM - Talk to me

JR1 (talk|edits) said:

January 3, 2007
I don't think so. It looks like you're suggesting that any mileage reimbursements must be reported on a 1099...and that's not the case. The $600 threshold applies, regardless of what's going into box 7 for miscellaneous payments. . .

Lhhesscpa (talk|edits) said:

3 January 2007
JR: Actually we are in agreement. I think I just didn't express myself clearly. -- Larry Hess, CPA, Albuquerque, NM - Talk to me

JR1 (talk|edits) said:

January 3, 2007
Good. I was worried about you there, for a moment....Now I THINK I know what you meant....!

PJLCPA (talk|edits) said:

3 January 2007
JR1 and Larry, Don't think so much before you get in the thick of things...You'll be all thunk out! LOL

Death&Taxes (talk|edits) said:

3 January 2007
Let me ask a silly question, since I often see this from the side of the recipient who has a 1099 with reimbursed expenses included. Aren't these payments, for which the payer most likely has receipt and records to prove before they issue the check, like an accountable plan which would not be on a W-2 form? I say this because you cannot believe the number of people who don't even understand that a 1099 might include expenses.

Deback (talk|edits) said:

January 3, 2007
D&T -


(1) It is incorrect to issue a 1099-Misc form to an employee for reimbursed expenses under an accountable plan. The reimbursements are also not included on the employee's W-2 form.


(2) It is correct to issue a 1099-Misc form to a non-employee for contractual services when the total amount paid during the year exceeds $600.

DZCPA (talk|edits) said:

3 January 2007
Lhhesscpa, So do you agree with me? Over $600 ?

"DZCPA (talk|edits) said:

3 January 2007

Only if paid over $600

Death&Taxes (talk|edits) said:

3 January 2007
Let me pin this down: I have a client whose musical group is hired to play at many festivals. There is no permanent players, but rather let's say he 'hires' an oud player [middle eastern music] for a gig in Chicago for $1100 plus the cost of airfare. When the musician arrives, he gives my client the receipt for the airline ticket and has that amount added to his check. My client gives me a summary for the 1099s and lists $1,100. Correct? This is what you mean by the contractural amount? Were he to contract the oud player for $1,100 plus $500 for travel (without receipts) then the 1099 should be $1,600?

JR1 (talk|edits) said:

January 3, 2007
Good question, D&T. Technically, the air tix or mileage isn't for services...now I'm wondering what my clients do include on those 1099's. yikes. Or what they should include. Wonder what the rules are. Can you reimburse a non-employee and deduct it directly?

Deback (talk|edits) said:

January 3, 2007
If your client paid the oud player $1,600, then the 1099 form should be for $1,600.

Death&Taxes (talk|edits) said:

3 January 2007
I should have put that the ticket presented showed a cost of $500, and the oud player also gives my client the copy of a credit card receipt [after all, he could have used frequent flyer miles]. In the second example, the 1099 would obviously be for $1600, but my client is the type not to fork out money where he gets no proof it will be spent. His standard contract is for a specified fee plus travel costs on presentation of receipts.

Lhhesscpa (talk|edits) said:

3 January 2007
The total paid to an I.C. during the calendar year includes expenses. The accountable plan rules don't apply to I.C.s, only to employees. You all might have noticed that large corporations and government organizations are sending 1099s to all of their vendors, whether or not they provide services, whether or not they are incorporated. Some even report all amounts, even those under the $600 threshold. It is simpler for them to not get involved in trying to distinguish between sales of services and tangibles and authenticating business who say they are incorporated. Many people mistakenly think that the "C" in LLC means corporation rather company. In any case, if a service provider is reporting all of their revenues as taxable, a service recipient who files 1099s that might not be required has done no harm. They have protected themselves from the $50 penalty for each infomartion return not filed. -- Larry Hess, CPA, Albuquerque, NM - Talk to me

Tea & Taxes (talk|edits) said:

3 January 2007
My spouse gives lectures at universities. He is paid a small fee and reimbursed for expenses like the music folks. When the 1099-MISC's come there is no use trying to determine the policy of each payer (and they DO vary in the what they report) so he keeps his own records. Hmmm...he must both submit receipts to the payer for reimbursement and retain the receipts in case of audit. I counsel my clients to keep their own records, copy all receipts submitted and ask payers up front how they will report.

Death&Taxes (talk|edits) said:

3 January 2007
This is interesting: many localities have business mercantile taxes based on gross receipts, so I want to eliminate these reimbursed expenses on Line 2, Sch C, and not include them as travel, etc etc, lest the client pay mercantile tax on his expenses. Client today had in excess of $9,000 of expenses reimbursed dollar for dollar. I always annotate this entry with the heading 'reimbursed expenses included in 1099.'

Msmith7305 (talk|edits) said:

4 January 2007
Lhhesscpa-

I disagree with your statement re 1099s to ICs include all expenses. Please refer to Publication 463 (around pg. 32) in regards to contractors who account to the client for travel, entertainment. and gifts. Also see instructions for Form 1099-MISC concerning exceptions to reporting payments made for expenses accounted for to clients.

Death&Taxes (talk|edits) said:

4 January 2007
I think the reason most filers of 1099s lump all together is that it is simpler to program their computer that way, just as it is simpler not to build the $600 exception into the program. Doesn't make it right, but it can confuse the average self-filer and many professionals, but the providers are big and we are small.

Lhhesscpa (talk|edits) said:

4 January 2007
M Smith: If you are referring to the section entitled Rules for Independent Contractors and Clients, I think this refers to bookkeeping issues and how to report reimbursed expenses on your tax return. It is not info. for payors who make reportable payments and must file information reports (i.e. 1099s). The I.C.'s bookkeeping system should be set up so that expense reimbursements can offset expenses primarily so that the 50% deduction for travel meals can be computed on the net expense after reimbursements and so that the $25-per-recipient-per-year limit on deductions for business gifts is properly reported. As far as gross receipts are concerned, so far as I know or have experienced, the IRS is satisfied as long as total gross receipts reported by a business are at least as much as the 1099s it has received from payors. In the case of my business, for example, most of my gross receipts are not reportable on 1099s either because my clients pay me less than $600 per year or my services are not provided to businesses. Please try again if I have misunderstood your concerns. -- Larry Hess, CPA, Albuquerque, NM - Talk to me

Death&Taxes (talk|edits) said:

4 January 2007
"A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600." That is from the 1099 Instructions. The instructions also give this: "Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. For example, report the total insurance company payments to an auto repair shop under a repair contract showing an amount for labor and another amount for parts, if furnishing parts was incidental to repairing the auto." To me the key word here is 'incidental.'

In Publication 463 the mention of the 1099 including the expenses comes at the end of a paragraph 'Contractor does not adequately account' while earlier the publication goes to great lengths instructing the payer to keep records documenting each segment of the expense. Let's remember here the reason for this admonition and why the payer cannot lump payments as one expense. If meals are reimbursed dollar for dollar, the payer must cut his deduction by 50%.

For the most part 1099s go down the food chain. Oft times the recipients are disguised employees who need the work, and or in many of my clients' cases, newspaper stringers, writers and the like whose idea of a set of books is keeping the check stubs and depending on the 1099s. To me it seems like some people won't be happy until every transaction in this country is accounted for on a 1099.

Msmith7305 (talk|edits) said:

4 January 2007
Larry-

Not sure if you are agreeing with me or not. As stated above by D&T, you DO report on 1099-MISC a travel reimbursement to a non-employee IF he did not account to you for it. If he did account for it, it is NOT reported on 1099-MISC. Thus the premise of my original statement that not all amounts paid to ICs are to be reported on 1099-MISC.

From 1099-MISC instructions page MISC-6:

"A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600."

Lhhesscpa (talk|edits) said:

5 January 2007
Thanks for pointing this out. I stand corrected. I enjoy learning new things as much as testing my knowledge in this forum. -- Larry Hess, CPA, Albuquerque, NM - Talk to me

Death&Taxes (talk|edits) said:

5 January 2007
But note the comment above from the 1099 instructions: "Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. For example, report the total insurance company payments to an auto repair shop under a repair contract showing an amount for labor and another amount for parts, if furnishing parts was incidental to repairing the auto." That weasel word 'incidentals' can be used to justify many things. A writer bills a publisher $1,000 for his writing, plus $28 of copying costs. I am sure the publisher will say these are parts and materials and are incidental!!!! So I suppose all of us are correct to a degree!!!

Tsholly (talk|edits) said:

8 January 2007
KISS it and report total payments.

LJACPA (talk|edits) said:

8 January 2007
Larry, you mentioned LLC, company not corporation, but didn't really state why you mentioned it but I assume it was because of the non-reporting to corporations (except atty fees). I thought that LLCs, even those reporting as partnerships were also excluded from the 1099 reporting requirements, just like corporations. Could you please provide source info, I couldn't find it. Thank you.

Lhhesscpa (talk|edits) said:

9 January 2007
I can't find one either. I'm going to keep looking. Non-authoritatively speaking, LLCs are not corporations, at least not in my state, but are distinctly different legal entities formed under a separate state law from that for creating corporations. Consequently I've always considered LLCs not to be corporations and therefore payments to LLCs are not excluded from the reportable payments under Regs. Sec. 1.6041-3(p)(1). That reg. also refers defines a corporation in terms of Regs. Sec. 1.6049-4(c)(1)(ii)(A) which in turn refers to the definitions in IRC Sec. 7701 neither of which refer to an LLC in any context, much less as being a corporation. -- Larry Hess, CPA, Albuquerque, NM - Talk to me
  • A series of questions from a non-tax-pro, and the related responses, have been moved to a discussion on the consumer forum (link to be provided later).

To join in on this discussion, you must first log in.
Personal tools