I have a question I would like to ask. I am an accountant and I am having a difficult time with one of my clients.
I have a client who owns and operates a travel agency. In prior years, she had employees where I did prepare her payroll tax returns, w2 and 1099 MISC/1099NEC.
Well, back in 2019 she decided to stop paying wages and considered them all subcontractors, which I am trying to explain to her the difference between employee and subcontractor. I am trying to explain her, you can't decide whose an employee or subcontractor. There are rules that need to be followed to make that determination.
Anyways for 2022, I called her and asked any reportable wages for the 4th Qtr 2022, she replied NO. So I prepared all the usual payroll tax returns. I also asked, any 1099NEC or 1099 MISC that need to be generated. Her reply was No. She said, the girls are taking their commissions and putting them towards future trips.
I explained to her, even though no money was exchange but they did use that money towards a trip would still be considered reportable income for that tax year. It was would be the value of the trip that needs to be reported on 1099NEC or 1099MISC.
My question is, am I correct, even though they didn't physically receive money but it was applied towards a trip, the value of that trip is still reportable income? If I am wrong, please let me know.
Also, if I am correct, would I use 1099 NEC or 1099MISC. Not sure how that type of transaction would be reported on the 1099 form. Would this be considered a SPIFF or would this commission still be responsible for self employment tax as well.
Again, nobody here will be held accountable by answering my question. I am just looking for input here.
Thank you
Lisa
