How to show labor invoices

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Austinman
Austinman Member Newcomer
edited January 15 in General
  1. If you have someone help you with a project and you pay them cash, how can this be shown as a cost to the business?
  2. If you say I need a receipt or invoice then what is acceptable?
  3. Jotted down on a piece of paper or on a receipt or invoice book?
  4. Is the $600 threshold a one shot invoice or a accumulation over several months to add up to $600?
  5. Is bartering allowed? Like if they are renting and you trade rent for lawn maintenance?

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  • AlexO
    AlexO FreeTaxUSA Agent
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    Hello, Austinman!

    Those are great questions! I'm inferring that this is a business that you solely own and operate, correct?

    1. If you pay a contractor over $600 in a single year, you're required to issue the contractor a Form 1099-NEC. This will also be sent to the IRS. When you prepare your return, you can enter this as a contract labor expense on your Schedule C.
    2. For acceptable business records, see this IRS link.
    3. See the above. The IRS doesn't seem to be very specific as each audit is handled on a case-by-case basis.
    4. It is a yearly threshold.
    5. Bartering is allowed. You need to include in gross receipts, at the time received, the fair market value of the services you receive. See 'Bartering for Property or Services' on page 20 of Publication 334.