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A Non Profit attorney firm paid another attorney to reimburse him for costs he spent on the non profit firm's client. How should the non profit attorney firm report this reimbursement to the outside attorney?
Thank you!
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If they submit it as Accountable, I don't include it on the 1099-NEC. Otherwise, I include it. Either way, they are supposed to track their costs and reimbursements at their end.
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They did not submit it as accountable. Does it go on MISC or NEC?
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https://www.irs.gov/instructions/i1099mec
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I read the instructions first and then asked the community because I do not know where this situation falls. I think it is 1099-NEC box 1, not 1099-MISC. Does anyone out there know? Thank you
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"Does anyone out there know?"
I gave the link, where you will find a bunch of details to help you determine which form applies based on which of the conditions apply. You described a third-party relationship. You really need to read that for the various parts, to determine which form applies.
Because no one but you knows all of the details.
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Read the -Misc details, at this section:
"Payments to attorneys.
The term “attorney” includes a law firm or other provider of legal services. Attorneys' fees of $600 or more paid in the course of your trade or business are reportable in box 1 of Form 1099-NEC, under section 6041A(a)(1).
Gross proceeds paid to attorneys.
Under section 6045(f), report in box 10 payments that:"
Read All The Way.
Then, read the -NEC section:
"Payments to attorneys.
The term “attorney” includes a law firm or other provider of legal services. Attorneys' fees of $600 or more paid in the course of your trade or business are reportable in box 1 of Form 1099-NEC, under section 6041A(a)(1).
Gross proceeds paid to attorneys.
Gross proceeds are not reportable by you in box 1 of Form 1099-NEC. See the Form 1099-MISC, box 10, instructions, earlier.
Payments to corporations for legal services.
The exemption from reporting payments made to corporations does not apply to payments for legal services. Therefore, you must report attorneys' fees (in box 1 of Form 1099-NEC) or gross proceeds (in box 10 of Form 1099-MISC) as described earlier to corporations that provide legal services."
Because, as I noted, you have a third-party relationship, or the one attorney did in fact work for the other, and not on behalf of that client directly, or they both worked directly, or?
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Then how do you know it is to reimburse expenses?
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And we don't know what sort of costs these are. They could be labor, such as clerk, or recording fees, or witness fees, or deposition costs with meeting room rentals, or medical expert opinions, or... And it isn't clear if that was provided to the common client, to the client as subcontracting to this attorney, or at this attorney's request. We don't know if there are some settlement funds that went to each party, one party, etc.
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