1099- Amount includes reimbursments

[fly_mj]

What is the name of your state? OH

Question 1: I moonlight as an IT consultant for a business who then sends me a 1099. Because it is a lot less hassle I purchase pc's, software, etc with my own credit card and they then reimburse me for the exact amount. They then send me a 1099 that includes all the money for hardware etc...so it looks as if I made a bunch of money when really only a small amount that I charge for install, setup, etc. How do I report this? I am really not reselling the equipment. I am just getting reimbursed for it.

Question 2. In 2006 I bought aprox 40K worth of hardware/software for this company. I didn't finish the job and or bill them unitil after Jan 1, 2007...so 2006 is going to have all the expenses while 2007 shows all the income? What are the rules or what shall I do?

[LdiJ]

Originally Posted by fly_mj

What is the name of your state? OH

Question 1: I moonlight as an IT consultant for a business who then sends me a 1099. Because it is a lot less hassle I purchase pc's, software, etc with my own credit card and they then reimburse me for the exact amount. They then send me a 1099 that includes all the money for hardware etc...so it looks as if I made a bunch of money when really only a small amount that I charge for install, setup, etc. How do I report this? I am really not reselling the equipment. I am just getting reimbursed for it.

Question 2. In 2006 I bought aprox 40K worth of hardware/software for this company. I didn't finish the job and or bill them unitil after Jan 1, 2007...so 2006 is going to have all the expenses while 2007 shows all the income? What are the rules or what shall I do?

You really ARE reselling the equipment. You may not be making a profit on it, but you really are reselling it. By treating it as a resale, you simplify your taxes. Instead of expensing the equipment, you treat it as "cost of goods sold". Therefore it becomes a reduction in income when you actually bill for the equipment, rather than when you purchase it. Therefore the 40k worth of equipment would belong on your 2007 return rather than your 2006.

[fly_mj]

They reimbursed me for the equipment in 2006. I didn't get paid for my services until 2007. So now what? The labor ended up to be a pretty good chunk.

So in summary the way it looks now is I have roguhly 40k in hardware, 3K in work that I subbed out, after expenses I might have made 5k

Then in 2007 I'll have roughly 25k in profit with nothing to go against...guess I'll have to work some more to pay the tax man??

[tranquility]

I assume you took the expense in 2005, right? If so, you received a benefit from the deduction (although I agree with LdiJ it should be in COGS). It is appropriate you pay the tax this year. I won't go through an if/then on how you may have reported things. This should not really be much of a problem--see a tax preparer to guide you on how to keep your books in a way to estimate your taxes better.