1

Assume X,Y are positive real number and X<Y. Suppose $X is the amount the patent lawyer disbursed to entities to file the patent for review including amounts to foreign examining agencies to examine the patent application, renewal fees to foreign governments for a granted patent application during some tax-period z, and $Y is the total money the company paid to the patent lawyer/law-firm during some tax-period z.

Is it legal in the United States of America if a company were to report in the "Nonemployee compensation" box of 1099-NEC $Y minus $X rather than $Y?

Improve this question
0

1 Answer 1

Reset to default
2

No

The IRS says

If you paid someone who is not your employee, such as a subcontractor, attorney or accountant $600 or more for services provided during the year, a Form 1099-NEC needs to be completed, and a copy of 1099-NEC must be provided to the independent contractor by January 31 of the year following payment. You must also send a copy of this form to the IRS by January 31.

It does not say "only include the amount that the contractor puts in their pocket, excluding anything that the contractor passes on to a subcontractor".

I'm a retired patent agent who did a lot of foreign filing. Only a fraction of the money my clients paid me was money I earned. A big percent being a "pass-though" from me to foreign associates for their fees and to pay official fees, exactly as in your example. What is important is the checks a client to me added up to Y. For my client to show the full expense (Y) on their books/taxes they need to issue a 1099 to me for the full Y.

On my books I show that my revenue is Y and that my expenses include X.

If, instead, a client wrote checks directly to the foreign associates/foreign office and paid me for my services separately, then I would have only received X and would get a 1099 that reflected that.

Improve this answer
0

You must log in to answer this question.