We are a vacuum company. We reimburse for personal property that has been damaged ...


Q. by our vacuums (floors, tables etc). Would we send a 1099 to them if greater than $600?

A. A settlement that reimburses for loss only is not reportable. Damages paid that are “replacement of capital” are excepted from reporting.

If this was a settlement as a result of a judgment and involved punitive damages over and above replacement or repair costs, it would be reportable.

See the Instructions for Form 1099-MISC, page 6.

Q. Just to clarify, if we are reimbursing for damages to the floor that our vacuum caused, i.e., scratched the floor, it would be NOT be reportable?  Also, we do not ask for proof that the damages have been repaired. 

A. This is correct. If you are only reimbursing the damages themselves, and not paying an amount above and beyond that just to keep the customer happy or paying out punitive damages as part of a settlement, you would not report it, as it is not income. It shouldn't matter whether the customer uses the funds to actually get the repairs made as long as you only paid them the cost of doing that, assuming you receive estimates or have set pricing schedules you use to determine the amounts of the payments.

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