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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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I'm a general contractor doing a lot of work local property

Customer Question

I'm a general contractor doing a lot of work for a local property management company. I have to purchase all supplies to complete their work, then submit for reimbursement along with my labor charges. Problem is, they include the reimbursement on the 1099-misc form every year. How and where is the best place to enter my direct expenses so it becomes a credit against what I owe, not just a deduction? I never make a profit on the materials; I bill them the actual amount.
Thanks
Submitted: 9 months ago.
Category: Tax
Expert:  Tax.appeal.168 replied 9 months ago.

Q: How and where is the best place to enter my direct expenses so it becomes a credit against what I owe, not just a deduction?

A: Since the reimbursement amount is included with the amount that you are paid, the best thing for you to do is subtract the amount of the reimbursement, which will reduce your taxable income. On Line 2 of the Schedule C you enter the amount of the portion of the 1099-Misc that is the reimbursement portion. Line 2 is subtracted from Line 1 Gross receipts. You should not include reimbursements in gross receipts because you pay self employment tax on the amount shown as gross receipts. I don't think you want to pay self-employment tax on money that is truly not income. For all expenses that you have not been reimbursed for, you can those as Other Expenses. You cannot list deductions that you have been reimbursed for.

Let me know if I can be of further assistance to you regarding this matter.

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