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Does a company send a 1099 to a person were it to provide a pre-payment for purchasing equipment?

In other words, Does the intent of the payment matter in "non-employee compensation" in a 1099?

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  • Are you an employee of the company or a self-employed person who is doing contract work for the company? Commented Jul 24, 2022 at 15:04
  • Is this equipment needed for their work (i.e., the company wants you to buy a computer and a monitor that will be used for work, and is reimbursing you, and is giving you the money beforehand instead of after)?
    – Joe
    Commented Jul 24, 2022 at 21:37

2 Answers 2

1

Any payment to a contractor would be included in the 1099-NEC that the company issues. Equipment needed to fulfill the contract would be a deductible expense from the contract income to the contractor.

For employees, on the other hand, no 1099 is issued. Equipment needed for work would be reimbursed by the employer and would be a deductible expense to the employer (and reimbursement would not be reported on the employee's W2).

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This sounds like a taxable fringe benefit, whether or not the non-employee purchased the equipment in the same tax period in which the pre-payment occurred. A 1099-NEC would be generated.

https://www.mcglinchey.com/insights/new-irs-rules-for-reporting-non-employee-compensation/

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