1099-NEC earner claiming personal assistant expenses on C

[nolanm]

Hi all

My client has only 1099 income om $200k, and wants to claim $36k for a personal assistant. Any issue entering this $36k as contract labor?  No 1099 was issued to the assistant, she was paid monthly in cash. Would IRS likely flag this as my client (the employer) should have paid by 1099?

Thanks for views

Nolan

[qbteachmt · Accepted solution]

"No 1099 was issued to the assistant, she was paid monthly in cash."

That payment type is fine. There are payment methods that are subject to 1099-K reporting rules (such as paying by Venmo or Credit Card = third party settlement entity) and those that are subject to 1099-NEC reporting rules (cash or check), and there are those that would have the person be on payroll, or be at risk of worker misclassification.

"Would IRS likely flag this as my client (the employer) should have paid by 1099?"

You don't pay "by" 1099. You can pay in cash, even for payroll (it's like cashing their takehome check, to hand them Cash and a paystub). What you have is a person not following any of the requirements. Yes, that's going to be suspicious, because there is a question right on the tax form regarding this topic. Have you examined the penalty for this? Is the assistant likely supposed to be a payroll employee?

Two wrongs won't make it right.

[BobKamman]

"Personal assistant" can be a euphemism for other occupations that start with a P.  Did you ask what kind of services are provided?  Are they related to the client's business, or perhaps to his "business" ?  

[rbynaker]

My first question is why doesn't this belong on a W-2?

Then we get into what services were provided and do they constitute an ordinary and necessary business expense?

[qbteachmt]

When someone reports $200k as business income, I doubt the $36k for "assistant" seems suspicious. You see personal assistants with influencers and movie/music folks. What we don't know is, if the assistant is working only for this one person (would lean to the W2) or for others, as well. And we don't know if these were "personal" services or truly business related (scheduling and coordination, for instance).

Paying in cash is never the issue. Right now, at least, cash still is legal tender.