Contract 1099 Misc

[Krystlea8]

This is a complicated issue but I will try and make it as easy as I can.  My husband owns his own semi-truck and he leases it on with a fuel hauling company. We have the truck set up as a business so he can have a 1099 with the company.  The company he leases the truck with charges their own fees for each load, rents him the fuel trailer and provides and charges for all insurances, IFTA, plates and permits he will need to operate. They take all this payment out of his settlement checks BEFORE they send him a check with the  what is left over from all the loads he hauls for  the period. It was always my understanding a 1099 misc. is supposed to report the gross amount paid to the contractor and that we should be able to claim all of those expenses on taxes at the end of the year, however, it seems as though the company he is leased with has other ideas. They file his 1099 misc. with the net amount after all the expenses are taken out.  I can not find anywhere online weather this is correct practice or not or if it is even legal. I feel like this is them trying to get away with something no one else is aware of. I just want to have some kind of idea before I confront them on the matter, any help with this would be amazing!

[LeonardS]

From what you have stated in your question the company pays your husband for his driving service's only.  They have paid all other fees and expenses related to the  delivery of the loads.  As a self-employed driver your husband can still deduct from his income any expenses related to his driving that are not covered by the company.  Your husband is not paying any of the fees that the company pays so he cannot deduct then as expenses.  Actually the company is making your husbands record keeping easier to maintain.  If your husband had to pay all the fees that are currently being paid by the company, he would have to pay the expenses out of pocket and keep accurate records of all these expenses to deduct on his tax return.  Yes, his paycheck would be larger, by the amount of expenses he paid, but the bottom line would be the same after he deducts the expenses.  He will net the same amount for each load.  The procedure the company is using is not in conflict with the reporting requirements for Form 1099-MISC. 

[Krystlea8]

I don't believe that is the case. The company leases the semi truck we own and we pay all of  the fees out of the amount paid for the loads hauled including my husbands pay for driving as well as the taxes for all of it.  With the truck being leased with them, it has to run under their DOT and MC numbers so all the trucks they have leased are under their insurance and they have to report the IFTA miles under those numbers as well. They charge us for all of the cost from the money we have already earned. It is is out of the agreed 85% of the load price, not their 15% fee we give per load. So, if for a 2 week period we have made a total of (we will use a settlement we have actually gotten) $11,518.83, that is the 85% total for all the loads hauled that period, then their office will deduct the amount for all insurance, trailer rent and plates from that amount, say in the amount of $2378.87, leaving us with $9139.96.  All of those cost would be business cost for our end as we pay them out of money we have earned, the company we lease the truck with does not take on any of this cost from their own funds. At the end of the year when we get the 1099 we get it in the amount they of the left over funds after they take out what we owe for our own operating. So, when I file taxes and I want to claim these costs as business expenses the 1099 does not reflect the income we made to cover these expenses thusly showing us to have had a loss for the year if I claim them.  If the cost for all of these charges is coming directly out of the 85% per load pay we made for the year and not from the 15% the company gets for its fees from each load then how are they the ones to be able to claim them as their business expenses as apposed to the people leasing their equipment and paying the actual cost of them?  I know this is a complicated situation, most people that do not specialize in the trucking industry get cross eyed any time you talk about it in general without the idea of taxes coming into play, so I am just really trying to get it as detailed as possible so I can understand 150% what is going on. We have been leased to other companies before and they charged in the same way and never sent a 1099 that was not the gross amount for the year.

[RobertG]

You are correct that you can't report income net of expenses, and then also deduct the expenses.

As I understand you the amount on the 1099 is net of expenses that you are actually paying.  

So you can either report more income than is shown on the 1099 and deduct the expenses you are paying, or report the income net of those expenses and not deduct them.

Either way, you should show the same net profit from self employment.

You should report your business in the way that you believe correctly reflects your income, expenses and net profit.