For the tax geeks out there, choosing to NOT have an accountable plan also passes the 50-percent limitation on meal and entertainment deductions on to your independent contractor. It is simpler and easier to simply report all payments on the Form 1099-MISC and it saves you from the liability of retaining documentation and receipts for years and years. If you are the business that is paying independent contractors, it is better for you to NOT have an accountable plan and leave the responsibility for finding and keeping receipts to your independent contractors. It will then be up to the independent contractor to deduct those business-related expenses on their own tax return. Option #2: If the business does not have an accountable plan and does not require independent contractors to provide receipts, then reimbursed amounts WILL be included in the totals on the Form 1099-MISC. If the business requires independent contractors to follow this procedure, then those reimbursements will NOT be included in the independent contractors’ Form 1099-MISC.

What this boils down to is that there are receipts for each of the expenses. Under this option, the independent contractor is required to provide documentation that expenses are business-related (no massages or mani-pedis can be reimbursed!) and that the amounts are substantiated. Option #1: The business can require independent contractors to follow an accountable plan. But should you? The answer is … it depends!Ī business owner has two options when preparing expense reimbursements to independent contractors: Heck, you may have purchased those blank forms already! But do you know what to include in those figures that you’re reporting on a 1099-MISC form? One of the biggest myths out there is that you don’t need to include expenses in those totals. You may know about the need to issue 1099 forms in January. 1099 Myth #1: Expenses Aren’t Included in 1099 Totals

Idependent contractor expenses