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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1163
Experience:  16+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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Myself and an associate are hoping to sign a small contract

Resolved Question:

Myself and an associate are hoping to sign a small contract for services to the BC Ministry of Children and Family Development. The Ministry only wants one person's name on the contract however, because both myself and my associate have our own businesses this would mean that the cheque goes to one of us, and we would then have to pay the other from our business account. This would only be a small portion of yearly income for either of us (maximum $6000). If I put my name on the contract, and a monthly cheque is submitted to me from the Ministry, can I pay my associate her portion and consider her a consult, and that fee as an expense to my business? Are there other implications that I need to consider? We work absolutely independently of the other offering counselling services to children and families.

Thanks - Felicia.
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.

Hi, Felicia.

 

Welcome and that you for giving me the opportunity to assist you with your tax question.

 

Based on the information you have provided, if only one of you is permitted to sign the contract for services with the BC Ministry of Children and Family Development, and the payment is made to that person who signs the contract, you are correct that the person receiving the payment should deposit it into a business account. The payment made to the other person most certainly can be a consult fee which is considered an expense to whoever is making the payment. Of course, the person receiving the consult fee then includes that amount as income into her business account. As I am sure you know, you both should keep detailed records of such an arrangement.

 

Please let me know if you require further information or clarification.

 

Thank you and best regards.

 

Barb

Customer: replied 1 year ago.

Thank you for the response. One final question. At this point I only work part time, and so don't make more than $30,000 and don't have a GST #. I'm assuming this would not change, as even though I am depositing the contract cheque into my business account I am not declaring it as income, just as an expense, correct?

Expert:  Barbara replied 1 year ago.

Hi, Felicia.

 

Thank you for your follow-up question. The contract payment is income to your business. However, the fee you pay your associate for her consult fee is an expense. What is left is your income. I.e., you receive payment of $100.00 and you deposit it into your business account. You write a check from your business account to your associate for $50.00. That leaves $50.00 of income to you.

 

Please let me know if you require further clarification on this.

 

Thank you and best regards,

Barb

Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1163
Experience: 16+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
Barbara and 2 other Tax Specialists are ready to help you
Expert:  Barbara replied 1 year ago.
Hi, Felicia.

Please let me know if you require further information. If not, please take a moment to rate my answer to you since that is an important part of being an expert on JustAnswer, and I strive for excellence.

Thank you and best regards,
Barb
Expert:  Barbara replied 1 year ago.
Hi, Felicia.

Thank you so much for the positive rating. It is most appreciated. If you have any questions in the future, please feel free to put "for bkb1956 or Barb" in the subject line, and I will be happy to assist you.

Thanks again, and best regards,
Barb

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Barbara
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16+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.