Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
First off, your Quicken/Quickbooks method is a good way to track these expenses
Second, your 1099 income received to yourself is considered self employment income. To avoid having to pay employment taxes on the entire amount that you receive (your entire net income, that is) you would need to issue a 1099 to the S-Corporation for the amount that you paid them
SO essentially you are paying yourself, and shifting the tax reporting from you as an individual to your S Corporation.
If you are audited, then you simply show where you transferred the funds, issued the 1099 and paid the tax as an S Corporation
Issuing the 1099 to your S Corporation is key, because it shows as a legitimate expense to your schedule C (which will have a net income of 0) and then show income to your S Corporation
Is there anything else that I can assist you with today? If not please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today.
Also I would seek legal counsel to determine if this treatment violates any securities laws.
Hope this helps
Please let me know if you need anything else in this matter.
To follow up, and make sure I have this correct-I would be the payer, to my S-Crop as the payee, and which box would I put the
dollar amount in Box 3 as Other income or Box 7 as Nonemployee compensation?