Accounting for personnel and rentals in taxes

Hi folks,

This year I started paying for help under the table for larger events - just 1 guy who helps me setup and teardown - I pay him for active time and mileage.

So, I'm totalling everything up for the year for taxes, and something just struck me. In my spreadsheet I use I wanted to record what I was making and what I was paying in fees (rentals, personnel, etc.) since it affected my net proceeds... but how does that work for taxes? Where I usually run into these expenses is when I do larger events, so those events usually send a 1099... so I'm assuming I'm going to have to eat it for 2018... but for the future:

1. If I have to rent to augment, and I include that fee in my charge to the customer, how should I go about handling that? Obviously that's taking away from my profit but it doesn't look that way from a 1099 perspective. Should I just add the rental fee as a business expense?

1. What should I be doing with my friend that I pay to help me? Do I need to get a W9 from him and keep receipts for my payments to him (I use Venmo for this so that's easy enough to do).

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Originally Posted by DJ Elevate

Hi folks,

This year I started paying for help under the table for larger events - just 1 guy who helps me setup and teardown - I pay him for active time and mileage.

So, I'm totalling everything up for the year for taxes, and something just struck me. In my spreadsheet I use I wanted to record what I was making and what I was paying in fees (rentals, personnel, etc.) since it affected my net proceeds... but how does that work for taxes? Where I usually run into these expenses is when I do larger events, so those events usually send a 1099... so I'm assuming I'm going to have to eat it for 2018... but for the future:

1. If I have to rent to augment, and I include that fee in my charge to the customer, how should I go about handling that? Obviously that's taking away from my profit but it doesn't look that way from a 1099 perspective. Should I just add the rental fee as a business expense?

1. What should I be doing with my friend that I pay to help me? Do I need to get a W9 from him and keep receipts for my payments to him (I use Venmo for this so that's easy enough to do).

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The main reason I don’t have helpers is because paying them brings up a lot of issues... minimum wages, taxes and SS withholding, workers comp, etcetera. It’s just more of a PITA than it’s worth for me. If you’re paying under the table, I think you’ll just have to eat that cost, as claiming it might expose you and your helper to further scrutiny.


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Originally Posted by DJ Elevate

Hi folks,

...........paying for help under the table.....

......taxes........

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these two things never go well together.
my learned colleague laid it out clear enough, but just to be clear:
your "help" will have to be registered as a business and give you a tax deductible invoice for his work in order for you to even mention it in your accounts.

the IRS looks very unkindly at unofficial payments that are made to parties that are not registered either as
a: an employee (with all the cost and fun that entails).
b: a tax paying business.

in your case you will have to smile in front of your accountant as you forget to mention it...
and hope wither your "help" or clients don't decide to mention your scheme to the IRS.

in the worse case your "help" gets injured and sues you.

Treat your help as a contractor & let him worry about the taxes. If you hire a painter to come in and paint your kitchen, you dont put him on your taxes. You may put that you pay him but you dont send him a 1099 etc. Treat him just like a contractor. Pay him for his work as contracted help & let him figure & report his own taxes.....

Or, since its under the table, keep your mouth shut, if that was your intent in the first place, and I assume that it was by you "paying under the table". If its cash, its untraceable.

Just FYI, I am not condoning cheating on your taxes. You asked a question & its simply my opinion. What you do its up to you. However, showing him as a contractor, is not illegal. But you should let him know that you are planning to show his pay on your taxes. That way, he can make plans to show that income on his taxes as well. That way he dont get caught up, then you have to find another "contractor" to help you set up.

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Originally Posted by DJ Elevate

Accounting for personnel and rentals in taxes

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I would highly recommend talking to a tax accountant. Anything you read here is anecdotal at best.

The IRS does not mess around if they think that you owe taxes.

In the U.S., if you pay someone less than $600 in a year, you are not required to provide a 1099, but you can still treat the payments as a legit business expense. You treat the payment as a "fee" paid to the person. Technically, that person ought to report the payment as income on his own taxes, but that is not your problem.

I talked to my financial advisor and he said that as long as I'm not paying him over $600 a year, I can consider him "contract labor" as others have mentioned and list it as an expense without having to deal with the whole employee/1099 situation.

I'm glad you got a direct answer from a professional. Good luck...

Most of your labor/DJ's can be treated as general contractors. Don't forget to get w9's from them and send out 1099's at the end of the year. If they start working close to full time hours or being an imperative part of your business's daily operations, you will need to plan to make them employees.

Having employee's really isn't that difficult, but don't attempt it yourself. You're really just looking at maybe a couple hundred bucks a month for a payroll service, workers comp (it's cheap), plus your half of their social security taxes (about 7%). Luckily you don't need to worry about health insurance until you grow pretty substantially.

It’s not that important... if amazon and Netflix can pay $0 in taxes, I wouldn’t worry about it to much. If you don’t want to have the taxes taken out of your money at the end of year, just charge the client. And if you don’t want the hassle of all the tax stuff for an employee, just hire someone from an employment agency. This is what big money does to hide from all the legal nonsense.