Bookkeeping

Is reimbursement an expense or an income to the contractor?

Hi,

I am pretty confused about the reimbursements. If a business owner who pays a contractor for regular work, pays a separate check for a reimbursement, does that reimbursement count as the contractor’s income? Or the business owner record that reimbursement against an expense account?

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Answer

  1. 74 Answers

    Hi, Reimbursements are not income to contractors and should not be included when you provide 1099’s. The assumption is that the contractor has spent money out of pocket and now the reimbursement is making the contractor whole “repaying” the contractor so this is not income. However, the company can take the reimbursement as expenses. So for example, if you are reimbursing a contractor for gas or mileage you can record this as a transportation expense. Or, if you are reimbursing contractors for home-office expenses for example this can be tracked as home office supplies or you can set up a catch-all account as “Reimbursements”

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