1099-nec

[Tom2531]

I'm a self-employed contractor and my client started sending me a 1099-NEC for the travel expenses I incur on their behalf and and get reimbursements.  I understand my expenses "net out" the amounts on the 1099, but can't I just stop getting reimbursed for the travel expenses?  Won't that give me the same tax treatment when I file?

[rjs]

I'm not sure what you're trying to accomplish. If you stop getting reimbursed for the travel expenses, but you still have to pay the expenses, then you are just making less money. You would pay less tax because your income would be lower. You would still deduct the travel as business expenses, but you would be paying them out of your own pocket instead of being reimbursed. You can only deduct what you actually paid.

Your client should be sending you a 1099-NEC for everything that they pay you, not just travel expenses. Normally they would send one 1099-NEC at the end of the year for the full total amount that they paid you during the year.

[Tom2531]

Well, I'm going to deduct my business expenses whether I get reimbursed or not, isn't that right, and end up with the same tax liability.  This just seems like a cash flow issue.  For example, say I have contract that pays me $50,000/year for which I get a 1099-NEC.  In the same year I incur $10,000 in travel expenses working for my client and get reimbursed, so my total 1099-NEC is now $60,000.  I deduct the $10,000 when I file my taxes (with proper documentation) along with any other non-reimbursable business expenses.  If I don't get reimbursed for the $10,000 and simply deduct them as business expenses against the $50,000 1099-NEC, isn't my net profit $10,000 less?

[VolvoGirl]

Yes exactly.  That’s basically what the prior answer said.  You will have less income Net Profit to pay tax on.  

[rjs]

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@Tom2531 wrote:

If I don't get reimbursed for the $10,000 and simply deduct them as business expenses against the $50,000 1099-NEC, isn't my net profit $10,000 less?

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Yes, your net profit is $10,000 less because you paid $10,000 for travel that you did not get reimbursed for. You actually have $10,000 less in your pocket at the end of the year. You don't "end up with the same tax liability." You end up with less tax liability because you actually made $10,000 less income. There is no benefit to not getting reimbursed for expenses that you paid.