If client a submits a 1099 to me for work that I outsourced to another bookkeeper, and I submit a 1099 to the other bookkeeper, how am I taxed on the gross income from the client?

by Amy L. Bishop, CPA, MST | Aug 07, 2019

I am an independent bookkeeper, certified QBO expert and ProAdvisor. I have clients across the country, and looking to expand. I have a potential client who would pay me $2,000 to $3,000 per month, and I would be shifting the bulk of this work to my new bookkeeper while I manage her daily/monthly work. If the client submits a 1099 for me in full, let's say $36,000 for the year, that income would all be payable by me. If I submit a 1099 for my bookkeeper, would that lower my taxable income payable by the same amount which I paid to her? If not, what is the best way to do this so I do not pay on the full amount because I did not keep the full amount?

You would want to receive the funds directly from the customer and have them issue you a 1099. This will be included in your taxable income. But when you pay your bookkeeper and issue her a 1099 in that amount, that will reduce your taxable income.

Be careful to follow the rules for subcontractor vs. employee. Check out this CPA Now blog for some insight on the differences between worker classifications.

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Answered by: Amy L. Bishop, CPA, MST, is a tax and accounting manager with Delisi, Keenan & Associates PC in Greensburg, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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