Accounting & Bookkeeping & Small Business Forum

[areedy]

Our company build a wall to divide office space. We cut a check to the person we hired to build it. Do i account for this charge as a permanent improvement or a contract labor (expense)?

Thank you

[irsfixer]

areedy wrote: Our company build a wall to divide office space. We cut a check to the person we hired to build it. Do i account for this charge as a permanent improvement or a contract labor (expense)?

Thank you

Unless the cost was very minor, it is an improvement. You may still need to send the contractor a 1099 however.

[areedy]

Thank you!

[RobJ]

areedy wrote: Our company build a wall to divide office space. We cut a check to the person we hired to build it. Do i account for this charge as a permanent improvement or a contract labor (expense)?
Just curious, how much did it cost?

[areedy]

We paid $2,024.00, $600 of which was for the materials that contractor bought himself. So, I put the whole amount of $2024 under permanent improvement, right?

[RobJ]

areedy wrote: We paid $2,024.00, $600 of which was for the materials that contractor bought himself. So, I put the whole amount of $2024 under permanent improvement, right?
Yes.

[asnider]

And for that much, you definitely need to issue a 1099.

[areedy]

I thought I always have to issue 1099... Is there a maximum $ amount under which I do not have to do that?

[RobJ]

areedy wrote: I thought I always have to issue 1099... Is there a maximum $ amount under which I do not have to do that?
$600 ... if he's incorporated, you don't have to issue a 1099.

[areedy]

Thank you so much for information! You guys are so smart :D
How much experience do you have in accounting? I just finished my Bachelor in Accounting and am starting MBA next month... but I do not have much of real life experience yet... So, sorry if my questions are silly. I try to research IRS site as much as I can, but sometimes I have questions pertaining to a particular situation...and they have been answered so great on this forum. You have been so helpful. Thank you.

[Richard Noot]

areedy wrote: I thought I always have to issue 1099... Is there a maximum $ amount under which I do not have to do that? There is no maximum amount. There is however a minimum amount of $600.00
Regardless of the dollar amount a w9 needs to be obtained in addition to any 1099 requirement.

[areedy]

even if the person is incorporated?

[RobJ]

Richard Noot wrote: Regardless of the dollar amount a w9 needs to be obtained in addition to any 1099 requirement.
Straight from the Form W-9 itself:

"A person who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN)."

I don't believe Form W-9 is necessary until it becomes clear that you will have to file an information return. That said, some businesses choose to ask for a W-9 for any transaction with another business. I certainly wouldn't fill one out unless I knew it was necessary. I try to limit the number of people who have my social security/TIN numbers.

[RobJ]

areedy wrote: even if the person is incorporated?
The instructions for Form 1099 (page 13, section P) specifically states that Form 1099 is not required for payments made to corporations except under very specific circumstances.

"P. Payments to Corporations and Partnerships

Generally, payments to corporations are not reportable. However, you must report payments to corporations for the following:

• Medical and health care payments (Form 1099-MISC),
• Withheld federal income tax or foreign tax,
• Barter exchange transactions (Form 1099-B),
• Substitute payments in lieu of dividends and tax-exempt interest (Form 1099-MISC),
• Aquisitions or abandonments of secured property (Form 1099-A),
• Cancellation of debt (Form 1099-C),
• Payments of attorneys’ fees and gross proceeds paid to attorneys (Form 1099-MISC),
• Fish purchases for cash (Form 1099-MISC),
• The credits for clean renewable energy bonds and for Gulf tax credit bonds treated as interest and reported on Form 1099-INT,
• Federal executive agency payments for services (Form
page 9. 1099-MISC).

For additional reporting requirements, see Rev. Rul. 2003-66 on page 1115 of Internal Revenue Bulletin 2003-26 at www.irs.gov/pub/irs-irbs/irb03-26.pdf.

Reporting generally is required for all payments to partnerships. For example, payments of $600 or more made in the course of your trade or business to an architectural firm that is a partnership are reportable on Form 1099-MISC. However, see Regulations section 1.6049-4(c)(1)(ii)(A)."

Wordy, isn't it?

[asnider]

Yeah, I typically don't require that my vendors give me their EIN, but I obviously keep track of whether they are incorporated or not.