Tax Year Prior to 2020: Where to report parts/materials in addition to services on a 1099

[ValerieR]

We have 1099 contractors that we have paid for some parts and materials in addition to services.   Should I include the parts and materials in the same box 7 for nonemployee compensation or should I separate it and report it in box 3 as other income or somewhere else?  I originally thought the 1099 should show compensation for services only but see in the vague instructions that it should include parts and materials.

[VictorW9]

Normally, You will issue a 1099 Misc just for services rendered. In this case your contractor should have asked for reimbursement for parts and material so each of you would have accounted appropriately for the amount that is not related to services. In your part, that should be deducted in your schedule C as cost of goods to arrive at your gross profit. As like every other issue, good record keeping is paramount for both you and your contractor.

[ValerieR]

Thank you for your reponse, Victor.  I should have read the instructions in more detail before posting a question.  My further research provides the clarification I was looking for but  does not fully agree to your response.

The 2019 1099-MISC instructions indicate that  Box 7 should include payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service.

(I was not asking where to deduct the expenses on our tax return -- only how to report it on the 1099-MISC to the contractor.)

[VictorW9]

Sounds good! At times some contractors don't realize they should report the amount on their 1099s as income received as that amount is reported to the IRS as income. However if parts and materials were used they usually fail to capture the total income. I was looking at it on the other side of the coin. However, you should be good reporting the whole amount including parts and materials in box 7.

[Marika Young]

HI,

I have the same question.  For clarification, are you including the total cost of the material you purchased for installation along with the installation fee? Example: You paid $1000 for for a sign, $400 in permit fees and $650 for installation.  Are you reporting $2050 in Box 7?

[MinhT1]

If you paid the total amount of $2,050 to your contractor then you should report the amount you paid.

If you paid separately for the permit and the sign, and only paid $650 to the contractor for installation, then you should only report $650.

@Marika Young