Law firm1099

[bubulolo]

Let's say a client sends 10k to a law firm, 2k of which is for expenses to be paid on behalf of the client by the firm and 8k of which is the legal service fee earned by the firm. Should the 1099 be issued in the amount of 8k (legal service fee) or 10k (legal service fee + expenses fee)?

[tagteam]

The total amount paid to the law firm should be entered on the 1099 (it's the gross proceeds).

[bubulolo]

Sorry, I should have clarified. The client issued a 1099-NEC with box 1 (Nonemployee Compensation) stating the full amount, $10k. Should they have issued a 1099-MISC with 10k in box 10?

Either way, how's it supposed to be handled on the firm side--what kind of expense would the 2k be noted as, misc?

[VolvoGirl]

Yes enter 10,000 as income.  Then 2,000 to whatever kind of expense it was for.  Misc is ok.  Or you probably already expensed what you actual paid.  So don't enter the 2,000 as an expense again.  The 2,000 is probably offsetting your expenses.  If you are getting reimbursed for expenses you can't deduct it.  

[bubulolo]

It's technically the client's expense, the firm is essentially a middle man between the client and the vendor to whom the 2k will go to (i.e., client could have paid vendor directly).

Point taken though, it should be expensed once and doing so as Misc is ok.