Are referral fees deductible?

[dnilly9999]

I have an old coworker who referred me to a client and I am now actively working with that client. I want to pay a referral fee to my old coworker but I am wondering if any part of that fee is deductible.

Ideally, I can incentivize more people to send work my way and pay them a referral fee.

[NCperson]

are you a W-2 employee (not deductible) or a 1099-NEC self employed (deductible expense on Schedule C)

[rjs]

If you are an employee (you get a W-2) you cannot deduct any business expenses.

If you are self-employed you can deduct the entire referral fee as a business expense on Schedule C.

[Carl]

If you are self-employed you can deduct the entire referral fee as a business expense on Schedule C.

If you are a SCH C business, take note that if you pay any one person or disregarded entity more than $600 in any one tax year, you are required to issue them a 1099-MISC to show the total amount paid to that entity in that tax year.

[Carl]

If you are self-employed you can deduct the entire referral fee as a business expense on Schedule C.

If you are a SCH C business, take note that if you pay any one person or disregarded entity more than $600 in any one tax year, you are required to issue them a 1099-MISC to show the total amount paid to that entity in that tax year.

[rjs]

You report payment for services (such as referrals) on Form 1099-NEC, not 1099-MISC. If, in the course of your business, you pay someone a total of $600 or more in one year for services, you are required to issue a Form 1099-NEC. You also have to file the 1099-NEC with the IRS. It's not enough to just send it to the person you paid. The 1099-NEC has to be given to the payee and filed with the IRS by January 31 of the following year.