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Old 01-23-2008, 04:07 PM
 
30 posts, read 199,319 times
Reputation: 20

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Hello,

I own a very small advertising co. and during the month of August of 2007, I had a a personal friend with me as a 1099, commissioned only (salesperson), independent contractor.

Being this person was a friend of mine, I agreed to give her $250 per week to keep her afloat while she was starting out and would apply that amount towards her commissions earned each week. This was my personal guarantee to her and would be given out of my own pocket even if no sales were made.

The first two weeks she helped me setting a few things up and I spent some time training her. I gave her 250 cash for week 1 and check made out to cash for week 2. During weeks 3 & 4, she wrote one small deal (which did not cover her 250 in commission) and I wrote her checks made out to her name with 1099 in the memo.

This totals everything given to her during the weeks she was with me.

My question is... with the two 1099 checks I wrote her for weeks 3 & 4 totaling $500, am I responsible for sending her a 1009-misc for that amount?

(It is my understanding that I do not have to if the total is under $600. I am in New York state set up as a dba.)

I would very much appreciate it if someone could clarify this for me because if I do need to send the 1099-misc form out, it would need to be received before Jan. 31, 2008.

Thank you in advance!
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Old 01-23-2008, 04:21 PM
 
1,640 posts, read 4,138,104 times
Reputation: 1000
I may be misreading your post but it sounds like you gave her four checks, is this correct? Anyhow, you only need to 1099 someone for employee compensation if the amount is over $600, however; your friend must report all income even if he/she didn't receive a 1099 for it.

If you did in fact give them four checks, which I assume would total $1,000, you will have send out a 1099.
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Old 01-23-2008, 04:40 PM
 
30 posts, read 199,319 times
Reputation: 20
Thank you for your speedy reply.

Sorry if my long winded post was a bit confusing. No, I did not write her 4 checks.

I gave her:

Week 1: $250 cash
Week 2: $250 check made out to cash
Week 3: $250 check made out in her name with 1099 in the memo
Week 4: $250 check made out in her name with 1099 in the memo

The total amount in which she received 1099 checks for is $500 which if I understand correctly does not require me sending her a 1099-misc for because the total is under $600.

Is that correct?
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Old 01-23-2008, 05:00 PM
 
Location: South Dakota
733 posts, read 4,082,079 times
Reputation: 710
You paid her $1000.00. It doesn't matter if it was cash, a check made payable to cash, or checks made payable to her. It's still $1000.00. You need to report it as $1000.00
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Old 01-23-2008, 05:07 PM
 
30 posts, read 199,319 times
Reputation: 20
windtimber, I can understand that. But how would the first $250 in cash be provable? I gave this to her out of my own pocket.

Should the 1099 be sent as $750 being these 3 checks are what I have as proof as paid?

P.S. I do have an accountant but haven't received a return call all week and am assuming he is out of town. I'm stressing about this because I'm a small one man operation and I know if needed, the form has to reach her by the 31st of Jan.
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Old 01-23-2008, 08:44 PM
 
23 posts, read 88,871 times
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I would think that if you do not deduct the first two cash checks, you would not be causing harm to the total system.

You do know that checks made out to cash are usually not deductable unless you have back up receipts for the expenditures.
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Old 01-23-2008, 08:57 PM
 
210 posts, read 746,611 times
Reputation: 75
If you want to do it properly and legally, you should report $1,000 on the 1099. The first cash transaction and the cash check should be noted in your accounting system as "paid to contractor Jane Doe for services rendered". This is something your accountant should be able to easily handle.
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Old 01-24-2008, 06:44 AM
 
Location: Pocono Mts.
9,483 posts, read 10,721,824 times
Reputation: 11366
If you pay someone cash, you should write it down, so it is not forgotten - but you still should make out the 1099 for the $1,000. Just because you don't have a check written out with 1099 in the memo, does not mean she should not be liable for the taxes on the amount she received. Why should you lose out on the write off? Do you want to pay her taxes?
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Old 01-24-2008, 07:12 AM
 
663 posts, read 2,386,314 times
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You have to report the entire amount of income that you provided to the payee - regardless of what forms (cash, check) the payments took - because the total amount exceeds $600 and the payee is not a corporation. To report one portion and expense the other would prevent the income from being taxed completely.
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Old 01-24-2008, 09:11 AM
 
5,092 posts, read 9,604,630 times
Reputation: 3941
If you are somehow trying to avoid sending a 1099, you might have considered the first two payments as "loans." While a loan is not a reportable action, it is also not an expense on your own Schedule C. If you just do not want to send it, typical penalty for failure to provide a 1099 when above the threshold is $50.

Sort of amusing that if you had paid the money to her as a corporation (she being inc'ed that is) there is no 1099 requirement. So why is it that corporations do not have be tracked via 1099's? Is iti because their accounting would always be so above-board and honest?
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