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Old 02-04-2017, 04:29 PM
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Is a reimbursement for goods purchased by an individual considered an expense reimbursement eligible for box 7 on Form 1099?

My friend is an employee of a dealership A and is paid by them. She does outside sales for dealership A and other dealerships pay dealership A for her sales services as well. Last year she bought some monogrammed cups for another dealership B using her personal credit card. She paid $1109.56 for the cups. Dealership B then gave her a check for $1109.56 for the cups. That is the only payment they made directly to her. Otherwise, they paid the monthly invoice to dealership A for her services. Dealership B has now issued her a 1099 with $1109.56 in Box 7. According to my reading of 6041A, this expense should not be eligible for a 1099 because it was not a payment for services, but a direct payment for goods for which she supplied them the receipt. (*please see below for reference). Is this correct? Is Dealership B correct in issuing a 1099 for this payment? If so, why? Could you please point me to the relevant tax code?

Thanks so much for your help!

*Additional note: I have no idea if this is relevant, but when she paid for the cups, sales tax was included in the amount. Dealership B is now giving away half of the cups as promotional gifts and is also selling half of the cups themselves.

Here's what I was referencing:

2003?26 I.R.B. : https://www.irs.gov/pub/irs-irbs/irb03-26.pdf pg. 1116

"Situation 2. The payment for the purchase of computer equipment is not subject to information reporting under section 6041A because the payment is not for services. The contract is not subject to information reporting under section 6050M because the agency did not enter into a contract obligating an amount exceeding $25,000. Agency X does not have to file either Form 1099?MISC or Form 8596."

Pg. 1115

"Section 6041A(a) provides that if (1) any service-recipient engaged in a trade or business pays in the course of such trade or business during any calendar year remuneration to any person for services performed by such person, and (2) the aggregate of such remuneration paid to such person during such calendar year is $600 or more, then the service-recipient must file a return, according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the recipient of such payments. For purposes of the preceding sentence, the term ?service recipient? means the person for whom the service is performed. This information must be filed on Form 1099?MISC, Miscellaneous Income." **Situation 2 above uses an example to clarify this clause


Last edited by jeannine9 : 02-04-2017 at 04:33 PM.


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Old 02-05-2017, 02:06 PM
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My friend is an employee of a dealership A and is paid by them. She does outside sales for dealership A and other dealerships pay dealership A for her sales services as well. Last year she bought some monogrammed cups for another dealership B using her personal credit card. She paid $1109.56 for the cups. Dealership B then gave her a check for $1109.56 for the cups. That is the only payment they made directly to her. Otherwise, they paid the monthly invoice to dealership A for her services. Dealership B has now issued her a 1099 with $1109.56 in Box 7. According to my reading of 6041A, this expense should not be eligible for a 1099 because it was not a payment for services, but a direct payment for goods for which she supplied them the receipt. (*please see below for reference). Is this correct?===>>Agreed; once the dealership B paid the monthly invoice to the dealership A, then the dealership B shouldn?t have issued the 1099 to her as she is an employee o f the dealership A and the dealership B sent an invoice to the dealership A , not to her; another reason why she does not deserve the 1099 is that as you can see, when she receives 1099 box box 7 checked, then she should file her SCh C of 1040 as a self employer

however, simply buying and giving monogrammed cups for another dealership B is not her own self independent business completlely separated from the DS A, her employer since as you said, She does outside sales for DS A and other dealerships pay DS A for her sales services as well.In general, If your 1099-MISC has an amount in Box 7 , then,the payer did not consider you an employee. Instead, they are treating you as a self-employed worker, also called an independent contractor.however, as we know, she has no her own indeepdnet business and she gave ?em to the DS B in performing the duties of the employment. I believe that She needs to request DS B to correct the 1099.



NOTE; assume that say her employer ,the DS A ,reimbursed her biz related expenses paid by her credit card, then, payments made to her by the DS A , being reimbursement of expenses other than expenses of travel and subsistence, which are no more than reimbursement of vouched expenses, actually incurred by her in performing the duties of the employment, should not be treated as her pay. Expenses which are not treated as pay must not only be actually incurred in the performance of the duties of the employment but must also be wholly, exclusively and necessarily so incurred. Expenses, which are incurred by employees in travelling to and from the place of employment, are not allowable for tax purposes and any re-imbursement of these expenses must be treated as pay and taxed accordingly. Payment made to her which is no more than reimbursement of vouched subsistence expense, necessarily incurred by her, the employee, in performing the duties of the employment, should not be treated as pay for income tax purposes.


Is Dealership B correct in issuing a 1099 for this payment? If so, why? Could you please point me to the relevant tax code? =====>as mentioned above.



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Old 02-06-2017, 02:46 PM
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Thank-you!

Thanks! I appreciate your reply.



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Old 02-06-2017, 10:08 PM
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Quote:
Originally Posted by jeannine9 View Post
Thanks! I appreciate your reply.
For more accurate professional help, you may contact an Enrolled Agent or a CPA doin g taxes in your LOCAL area.



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