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Say I have paid $10000 to my vendor, then my vendor gives me a Vendor Credit note for $5000. When I issue a 1099 form, in the non employee compensation (Box 7), do I need to include subtract the debit note when calculating the total?

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Depends on the reason you were issued the credit -- rebates aren't income, remuneration for value you provide to them is. In other words, exactly the same as it they gave you money.

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