I’ve got a question regarding 1099 reporting of employee reimbursements. I went looking for an answer on the TAPN site, which is always very helpful, but I think I only found part of my answer...


Q. (cont.) Regarding payments to unincorporated hotels, I read that “If an employee pays for the (unincorporated) hotel himself on a personal credit card, then submits an expense report with receipt and is reimbursed for the cost of the hotel, no 1099 reporting is necessary.”

Can you expand on that for me?  What causes this scenario to not be reportable?  Is it the ruling that puts the onus of 1099 reporting on the credit card bank?  If that’s the case, that makes sense to me, but let me run this scenario by you…

The employee pays cash to a service vendor and requests reimbursement.  Is accounts payable required to go get a W-9 and report that as income (meeting thresholds of course)?  What about employees who pay cash to, say, a caterer, who charges a service fee along with the food?

And if all that is answered with a yes, that means that AP has to obtain W-9s on ALL vendors paid cash by employees (according to FACTA law).  Is that true or not?

If the answers are no, then can you point me to the IRS site/ruling/paper that outlines the information so I can have something documented?

A. Yes, payments made by credit card relieve you of reporting responsibility. The merchant bank is responsible for that reporting on a 1099-K.

However, in the question of an employee paying cash to a vendor (such as for catering), and then submitting an expense report, you do have to obtain a W-9 and report the payment (if $600 or more, and the vendor is not a corporation). In a situation in which an employee, acting on behalf of the company, makes a reportable payment in cash to a vendor and is then reimbursed by the company, he is acting as the company’s agent; the company must report the payment to the vendor (though not the reimbursement to the employee, if under an accountable plan). It does not have anything to do with FATCA.

We confirmed this with IRS information reporting specialist Ms. Tennant, ID# 1001307512, who cited section 1.6041-1(e) of the tax code.

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