For example, expense reimbursements that are properly substantiated and submitted to the organization within 60 days of being incurred will be treated as “substantiated within a reasonable period of time.” In general, expense reimbursements that comply with the accountable plan rules are not required to be reported by the reimbursing organization. The relevant Treasury Regulations clarify that an accountable plan may provide reasonable advance payment of expenses expected to be incurred subject to certain requirements and set forth certain “safe harbor” time periods that are deemed to satisfy the rules. The reimbursed expenses are adequately substantiated within a reasonable period of time (for example, actual receipts or other similar contemporaneous documentation) andĪny excess reimbursement is returned within a reasonable period of time. ![]() The reimbursed expenses have a “business connection” (in other words, are properly incurred in the course of the person’s duties to the organization) The “accountable plan” rules are highly detailed, but in general require that: Is the organization required to send a Form 1099 to these people to report the expense reimbursements?Īnswer: IRS guidance suggests that reimbursements paid to Board members and volunteers for expenses properly incurred in connection with organization functions are generally not required to be reported on Form 1099 if the expense reimbursements are made pursuant to a reimbursement arrangement that qualifies as an “accountable plan.” This is similar (but not identical) to the rules that apply to employee expense reimbursements and Form W-2 reporting. Only expenses necessary to attend the meeting and event are reimbursed, and receipts are required for reimbursement. Special thanks to the Client Services Team for providing their expertise on this post regarding reimbursing a contractor.Question: I serve on the Board of Directors of a nonprofit organization that reimburses Board members and volunteers for travel and related expenses for certain organization meetings and events. If they are already a contractor and are submitting extra expenses, those need to be recorded as taxable income – to be added to their Form 1099 at the end of the year.Īs always, if you are not 100% sure what to do with the request, reach out to your MM Client Services Representative, who will help you navigate the ins and outs of paying a contractor worker. So, the next time you receive a reimbursement request from your contract worker, take a minute to assess the situation. If they are asking you to pay additional items, these payments are also taxable income. Those are all included with the contractor’s fee. These are not additional items to your written contract. You are paying for their work.Īll of the contractor’s expenses to do their job: travel, office space, materials, labor, benefits, etc. They are providing and writing their contract. Contractors are setting their hours and their own pay. With those things in mind, let’s get back to our main point: no reimbursements for contractors. Where they talk about the differences between contractors and employees, and what can happen if you misclassify a person. Want to hear straight from the IRS? View their page on Independent Contractors. They don’t have a workspace in your physical space and these companies, or individuals, provide their own worker’s comp and liability insurance, not you. They could send someone else in their place to complete the proposed project. You might also like: Commonly Misclassified WorkersĪ contractor is providing a service for you – and other companies or individuals. But they receive a paycheck for the actual work that they do. They are not setting their own hours or sending someone else to do their job. ![]() They are getting paid for their work for the company. An employee can be reimbursed for their organization related purchases. Regarding the contractor’s request for reimbursement, we would like to set the record straight, once and for all. Your contract worker, who already filled out a W-9 Form, and will be receiving a Form 1099 at the end of the year. If you are still a little unsure though, start here.īut we do get requests about reimbursing a contractor for their expenses. You are also pros at knowing what paperwork each should fill out, and what happens at year-end for each type of person. Category: Administration | Tags: employee classificationīy now you know who should receive a 1099 and who should receive a W-2.
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