1099 - to include or not to include?

[Catherine]

Business client gave me their info for W-2s and 1099s.

Several of the 1099 vendors got small ($25) end of year "thank you" gifts, NOT for services rendered. All other payments to these vendors were properly invoiced for whatever - cleaning, snow removal, plumbing repairs, etc.

Should those small amounts be included in the 1099s in Box 7? I know the vendors have to report it as income, but wouldn't this be Line 21 "other income" rather than Schedule C self-employment income?

TIA,

Catherine

[Lion EA]

If the Thank Yous were due to a business relationship, then those amounts get included with their total W-2 or 1099 income. (If your client gave $25 to every business on his block as a holiday greeting, then maybe not, at least not for those with which he has no business relationship. Did he label those payments Advertising or Contract Labor?)

[Catherine]

The payments are labelled "Holiday Cheer" (and are only to vendors, not employees - read 'em the riot act about that topic a couple years ago - this is the first year I've seen bonuses to vendors).

On the 1099 they go. Vendors can separate for themselves what goes on Sch C and what goes on Line 21.

Thanks for confirming

[Lion EA]

Yep, that's what I would do also!

(Had a new client who uses Paychex write a separate $3,000 bonus check to an employee, not through Paychex. Don't know what I'll do, but it will include the riot act.)

[jklcpa]

Lion, let me know how it goes with your client, or what you are going to do with the bonus. I'm going to pick up a client's December records tomorrow and will see if holiday bonuses are written to employees exceeding the $25 and not put through the payroll service.

[Lion EA]

I'm trying to finish up at this cient's this afternoon and tomorrow. The employee in question is off as her stepson died in a car accident yesterday morning out of state! She would be my contact, so not reading the riot act this week! The amounts in this company are huge, as they are promoting their documentary worldwide, so the bonus is small compared to 2011 expenses. Don't know if I'll 1099 the bonus. She did consult before being hired in February, so it's one way to go. Or, have Paychex re-run December and year-end. I need to talk to her, but she needs time with her husband to deal with this tragedy before returning to work. I'll wait on 1099s until next week and see if she returns.