Taxpayer asks:
I own a S-Corporation. If I receive a project from my client and want to subcontract a part of it to another company, where do I show that expense on my business tax return? In deductions, there is a place to show 1099 subcontractor expense. However, this is not really a 1099 sub. It is a corp to corp. So, how do I handle that?
Taxgirl says:
If I understand what you’re doing correctly, you’re taking a job for X dollars and farming part or all of it out to another party to do the job for Y dollars. That party is another company (or individual) and not your employee. Is that right?
If so, then you would either report the payments as nonemployee compensation on a form 1099-MISC (depending on the nature of the compensation and the type of entity) or simply record it as a business expense. Either way, it’s not salary, so I’d put it on line 19 of the 1120-S as “other deduction.” You’ll need to attach a statement with the amounts broken out separately.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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