How to record a business payment to assistant

I have Quicken 2017 HB for my PC on Windows 10, I have a photography business that I track the income/expenses.  For the first time, I had a job where I needed an assistant, I'm trying to find the best way to record this.  The person isn't an employee or employee payment for any type of tax purposes, how would one record this best, if I didn't want to set up a paycheck?  Would it be considered an "expense"? I'm not sure, as when I do my taxes technically this isn't an expense that I can write off, but this was probably a one time deal, where I'm not going to set up employees.

Maybe just create an expense category "assistant/help" where i know at the end of the year I don't write that off?

Comments

  • volvogirl
    volvogirl SuperUser ✭✭✭✭
    edited May 2018
    Yes set up a category for Labor or whatever. It will go on your tax return on schedule C as Labor. You will need to give them a 1099Misc at the end of the year if you pay them $600 or more. Yes it is a business expenses and tax deduction. I assume you are fill out schedule C for your self employment business? Or is it setup as a LLC or some other kind of business entity? I can give you lots more info for taxes.



    Here’s how I track my business. But I don’t have the Home & Business version so you have more features and reports than I have.



    You should set up business categories. Make sure to assign them to a schedule C line item number so they show up as business categories. I don't know what categories you would need but my husband is a Land Surveyor. Here's how I set mine up (I also put the Schedule C line number in as part of the name)...



    Survey Income



    Survey Expenses
 ........


    11 Labor
 ........


    18 Office Expense
 .......


    .20 Equip Rent
 ........


    22 Supplies
 ........


    24a Travel
 ........


    27 Other - Printing
 ........


    27 Other - Small Tools

I made the expenses sub-categories of the main Survey Expense category.



    

Also I use Tags for each job. Then when I run a report I can sort it by job. So an expense entry might look like this...
Survey Expenses:22 Supplies/Maple Street
  • volvogirl
    volvogirl SuperUser ✭✭✭✭
    edited May 2018
    Why do you think you can’t write it off? It’s a business expenses. Have you used schedule C?


    https://www.irs.gov/pub/irs-pdf/f1040...



    Here is some IRS reading material......



    IRS information on Self Employment


    http://www.irs.gov/Businesses/Small-B...



    Pulication 334, Tax Guide for Small Business


    http://www.irs.gov/pub/irs-pdf/p334.pdf



    Publication 535 Business Expenses


    http://www.irs.gov/pub/irs-pdf/p535.pdf
  • Matt
    Matt Member
    edited October 2018
    @volvogirl - Thanks! So I didn't think I was able to write it off because it was a quazi-employee payment, not even sure what that means.  But i'm very young in my business and learning about tax codes and everything as I go.  It's self employed not LLC or other entity. (I have a full time job, this is part-time).  At this point I don't expect to pay them more than $600, so great I didn't know I can write off LABOR as a category that would classify for what I'm doing. THANK YOU.

    So how I started organizing w/ quicken is just have one tag for my self-employee part time business. then I tag everything income and also expenses - supplies, equipment, etc.  As I don't necessarily have expenses directly related for a specific job.  So my thought was at tax time i can just run a report for BUSINESS EXPENSES (with my tag) and every sub-category under (supplies, equipment, now labor) to get a breakdown.
  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    edited May 2018
    Matt said:

    @volvogirl - Thanks! So I didn't think I was able to write it off because it was a quazi-employee payment, not even sure what that means.  But i'm very young in my business and learning about tax codes and everything as I go.  It's self employed not LLC or other entity. (I have a full time job, this is part-time).  At this point I don't expect to pay them more than $600, so great I didn't know I can write off LABOR as a category that would classify for what I'm doing. THANK YOU.

    So how I started organizing w/ quicken is just have one tag for my self-employee part time business. then I tag everything income and also expenses - supplies, equipment, etc.  As I don't necessarily have expenses directly related for a specific job.  So my thought was at tax time i can just run a report for BUSINESS EXPENSES (with my tag) and every sub-category under (supplies, equipment, now labor) to get a breakdown.

    Unless that assistant was paid directly, and SOLELY, by the client ... then your payments to the assistant are deductible expenses to you.

    There's no such thing as a "quasi-employee" ... if the person isn't an employee (and it sounds like he isn't) then it's just a regular expense ... not unlike film.  Only, in this case, the expense goes on Line 11 of Sched C "Contract Labor".  Use the 1st link thaat volvogirl provided to see the Sched C.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Matt
    Matt Member
    edited May 2018
    Matt said:

    @volvogirl - Thanks! So I didn't think I was able to write it off because it was a quazi-employee payment, not even sure what that means.  But i'm very young in my business and learning about tax codes and everything as I go.  It's self employed not LLC or other entity. (I have a full time job, this is part-time).  At this point I don't expect to pay them more than $600, so great I didn't know I can write off LABOR as a category that would classify for what I'm doing. THANK YOU.

    So how I started organizing w/ quicken is just have one tag for my self-employee part time business. then I tag everything income and also expenses - supplies, equipment, etc.  As I don't necessarily have expenses directly related for a specific job.  So my thought was at tax time i can just run a report for BUSINESS EXPENSES (with my tag) and every sub-category under (supplies, equipment, now labor) to get a breakdown.

    Gotcha.. Thanks..
  • Matt
    Matt Member
    edited May 2018
    Another quick question I didn't see answer for - Equipment purchases large $1000-3000, are they schedule C? any idea what category for Quicken? Or again, best way to record that expense
  • Unknown
    Unknown Member
    edited May 2018
    Yes, the expense should be listed as "Contract Labor" with the correct Schedule C line 11 tax line item attached.

    BTW, since the assistant is not an employee and is "contract labor", you'll need to file a 1099 MISC form in January to the IRS with a copy to your assistant if the total amount paid to them for the year is $600.  

    There's no such thing as a "free lunch", therefore your assistant will need to pay income taxes AND BOTH halves of self employed social security to the IRS on the amount earned, regardless of whether a 1099 is filed or not.  Make sure they are aware of this...and you compensate them accordingly.  

    This would be no different than hiring someone as "temporary" or "freelance" employment.

    And there are strict IRS regulations regarding what can be considered contract, temporary or freelance.  In other words, they can't be a continuous employee and contract labor.  It they are considered to be a continuous employee, they must be treated as an employee and a W-2 form filed with employer and employee taxes withheld, reported and deposited quarterly to the IRS.

    In your case, however, an assistant for one job could qualify as contract labor.  If you retain him for another job down the road, that would still qualify as contract labor.  
  • Unknown
    Unknown Member
    edited May 2018
    Large equipment purchases are a Schedule C item, but have to be listed in the Depreciation Form 4562.  In almost most cases now, you can take the entire cost of the item and depreciate it immediately.  

    You can use ANY Quicken category, or create one yourself such as Depreciable Purchases or Business Equipment.  

    There is no Quicken tax line item in the list, so I've just listed it as Schedule C: Other business expenses.  
  • volvogirl
    volvogirl SuperUser ✭✭✭✭
    edited May 2018
    Yes you either add them as Assets and depreciate them over time or enter it as a one time expense. Not sure how to enter Assets in Quicken. Maybe the Home & Business version has that. Will you use Turbo Tax to do yourbtax return? Turbo Tax will help you.



    Here is a Turbo Tax article on Assets and Depreciation


    https://ttlc.intuit.com/questions/190...



    IRS instructions for form 4562 Depreciation


    https://www.irs.gov/pub/irs-pdf/i4562...
  • Unknown
    Unknown Member
    edited May 2018
    volvogirl said:

    Yes you either add them as Assets and depreciate them over time or enter it as a one time expense. Not sure how to enter Assets in Quicken. Maybe the Home & Business version has that. Will you use Turbo Tax to do yourbtax return? Turbo Tax will help you.



    Here is a Turbo Tax article on Assets and Depreciation


    https://ttlc.intuit.com/questions/190...



    IRS instructions for form 4562 Depreciation


    https://www.irs.gov/pub/irs-pdf/i4562...

    Quicken Home & Business has no special treatment for depreciable assets.

    In the op's case, I would just categorize them as "Depreciable Purchases" and leave it at that.

    In a more complicated scenario (such as in my case), you can create an Asset account and enter every depreciable asset as a transfer from the credit card/checking account TO the asset account.

    But that doesn't get the op what he'll really need...and that's a listing as if it's an expenditure.  Instead it will show up as a transfer...and I'm assuming that larger equipment purchases will be few and far between for the op.

    Also, as 0f 2017, the IRS has raised the threshold for items to be listed and depreciated to $2,500.  Therefore, any purchase UNDER $2,500 PER ITEM can just be listed as a regular expense and have a Schedule C: Supplies (not from COGS).

    *** COGS is Cost of Goods Sold.  If you purchase something in order to manufacture something else or for resale, that would be the Cost of Goods Sold.  Since the op is purchasing the equipment but not reselling it or using it in manufacture of something else, it's NOT from COGS.  
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