1099 Income for an LLC

[aravindreddy845]

I have started a Information Technology  consulting LLC on November 21st 2022 and 2 of my LLC employees who are on my payroll work for a different vendor on contract basis . That vendor made 2 payments to my LLC on December 19th and December 30th for hours worked by my employees. Now I ran the payroll for 2 of my employees in January 2023 (I took zero cut). My question is when I file my business and personal taxes for 2022 how should I report 1099 income which I received form the vendor? As I made no profit from it will my net income from my business be zero. Any input is appreciated. Thanks. 

[GeorgeM777]

Report the 1099 income and the employee expense on your business return.  Given that the two amounts--income and employee expense--are the same, the net effect would be, as you say, zero.   

@aravindreddy845

[aravindreddy845]

When I checked with the payroll company I use to run my payroll, they said my 2 employees will be will be receiving their w2's in 2023 for December 2022 payroll which I ran  in January 2023.  So if I have no w2's to back up for the year 2022, the amount which I received from vendor in the form of 1099  how should I report it as I cannot claim it to be employee expense/payroll. Thanks. 

[SantinoD · Accepted solution]

If you are operating on a cash basis (Under the cash method of accounting, income is generally recorded when you actually receive it, and expenses are generally recorded when you actually pay them), and according to how you got paid and when your employee got paid, you will recognize the income received in 2022.  The employee wages paid will be taken as an expense in 2023. 

So yes you will recognize income in 2022 without the expense to offset, but next year you will have an expense with no income, so it balances itself out. 

@aravindreddy845

[aravindreddy845]

Thank you this is such a relief to know.