Bart Posted June 10, 2011 Report Share Posted June 10, 2011 Client is a roofer. He gives the customer a discount if the customer lets him leave his advertising sign in the customer's yard. Does the roofer have to give the customer a 1099? Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted June 10, 2011 Report Share Posted June 10, 2011 The customer didn't receive any money. He just paid less for the roofing. No 1099. The IRS hasn't figured out a way yet to charge tax on money that we save by doing work ourselves or getting something cheaper by shopping around. Quote Link to comment Share on other sites More sharing options...
Pacun Posted June 10, 2011 Report Share Posted June 10, 2011 Client is a roofer. He gives the customer a discount if the customer lets him leave his advertising sign in the customer's yard. Does the roofer have to give the customer a 1099? your client needs to report the discount as income, deduct the discount as advertising expense and issue a 1099misc to the owner as other income. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted June 10, 2011 Report Share Posted June 10, 2011 If I am planning on buying a car from a dealership for $25,000 and find another dealer where I can buy the same car for $24,000 if I agree to leave the sticker on the window for a month, am I required to pay tax on the $1,000 I save? Quote Link to comment Share on other sites More sharing options...
rfassett Posted June 10, 2011 Report Share Posted June 10, 2011 your client needs to report the discount as income, deduct the discount as advertising expense and issue a 1099misc to the owner as other income. Really? Are you going to make the homeowner pay tax on phantom income? Do you have a cite of this. Maybe it would be better for the roofer to just lower his prices and stick the sign in the yard of every job he does like they do around here. But maybe I am missing something. Bart does not say if this sign is going to remain in the customer's yard beyond the completion of the roofing job. My answer might be different if that is the case. Quote Link to comment Share on other sites More sharing options...
rfassett Posted June 10, 2011 Report Share Posted June 10, 2011 If I am planning on buying a car from a dealership for $25,000 and find another dealer where I can buy the same car for $24,000 if I agree to leave the sticker on the window for a month, am I required to pay tax on the $1,000 I save? No, Gene, because you are in Alabama you would have to pay tax on the full $24,000. ;) Quote Link to comment Share on other sites More sharing options...
Bart Posted June 10, 2011 Author Report Share Posted June 10, 2011 Really? Are you going to make the homeowner pay tax on phantom income? Do you have a cite of this. Maybe it would be better for the roofer to just lower his prices and stick the sign in the yard of every job he does like they do around here. But maybe I am missing something. Bart does not say if this sign is going to remain in the customer's yard beyond the completion of the roofing job. My answer might be different if that is the case. The sign is going to remain in the yard for a few months after the job is completed. The roofer does not want to decrease his price. He wants to list the discount separately and have the ability to track the advertising expense. He is not worried about making the homeowner pay tax on phantom income. He is concerned with supporting his advertising deduction and following the 1099 rules. Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted June 10, 2011 Report Share Posted June 10, 2011 I would think his advertisement cost is the one-time cost of the sign, I have seen these signs before and they are reusable. In order for him to claim the discount as advertisement, he would need to issue a 1099. Plus he would have recognize 100% of the revenue including the discount, the 1099 will cover the advertisement cost. Roof $5000 Disc. -300 total. $4700 price He would report $5000 as revenue and the 300 as advertising expense, net = $4700 Quote Link to comment Share on other sites More sharing options...
OldJack Posted June 10, 2011 Report Share Posted June 10, 2011 >>In order for him to claim the discount as advertisement, he needs to issue a 1099<< Nonsense! His deduction is from incurring the expense of buying the sign and calling it what it is... a sign for advertising. There is no discount to record and no 1099misc to issue as there is no payment that qualifies. Issuing a 1099 does not justify a deduction for anything. A 1099 is only a report. Quote Link to comment Share on other sites More sharing options...
JohnH Posted June 10, 2011 Report Share Posted June 10, 2011 Do tax preparers who give referral discounts send 1099 forms to their referring clients? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted June 11, 2011 Report Share Posted June 11, 2011 If he wants to track the discounts for informational reasons, that is fine, But from a tax standpoint, he can not count the 'discounts' as advertising cost unless he includes the full price in his reported income from sales. So, since it is 6 of one, and half a dozen of the other, I see no point in doing that. It is not really income to the homeowner, unless the amount of the discount is 'material'. If it is, that should be shown as a 1099, but if the 'discount' is not a significant amount, I would not claim it as advertising nor issue 1099s. Since we don't know the amount of the total job before the discount, nor the amount of the discount, I see no way to take a position on either side. Quote Link to comment Share on other sites More sharing options...
Pacun Posted June 11, 2011 Report Share Posted June 11, 2011 Really? Are you going to make the homeowner pay tax on phantom income? Do you have a cite of this. Maybe it would be better for the roofer to just lower his prices and stick the sign in the yard of every job he does like they do around here. But maybe I am missing something. Bart does not say if this sign is going to remain in the customer's yard beyond the completion of the roofing job. My answer might be different if that is the case. No. It it not a phantom income. It is income for services/rental. This is other income to the home owner because he must provide a service/rental(whatever you want to call it) in order to qualify for the discount. "Do you have a cite of this" Why don't you look for a cite and share with us that this IS NOT income because the homeowner or his property will not perform a service in order to get the discount? For those who prepare cab drivers returns.... next time ask the cab driver if he has a marlboro sign over his head while working and ask him how much they pay him/her and report it as other income. Quote Link to comment Share on other sites More sharing options...
JohnH Posted June 11, 2011 Report Share Posted June 11, 2011 The roofer isn't paying for advertising - he's just adjusting his price to what the competition is doing and using the "advertising" gimmick as his excuse to the homeowner to make it look like an exchange of value. From a practical standpoint, I recommend that the roofer just discount the bill and forget about all the extra accounting. People are a lot more savvy about this nonsense than most businesspersons realize. (some are even insulted by it). If I'm wrong about this, let me know because the nxt time I have a plumbing repair done I'm going the tell the guy he has to reduce his bill to allow for the "advertising" he's getting while his truck is parked in my driveway. If he wants to know how much he "spent" during the year on these phony discounts, he should just write it on a yellow legal pad and add it up in December. Much less complicated, especially since it was money he was never going to see in the first place. Quote Link to comment Share on other sites More sharing options...
jainen Posted June 11, 2011 Report Share Posted June 11, 2011 >>I see no point in doing that<< That doesn't mean there is no point. Perhaps the contractor has a good reason to show maximum gross income on his books. Or perhaps this particular transaction is smoother with such an understanding. A 1099 would support the advertising expense deduction, but it would be much cleaner to simply charge full price and then pay for the advertising space. If the homeowner were my client, I would say he just granted an easement incurring a minor basis adjustment, not taxable income. Quote Link to comment Share on other sites More sharing options...
OldJack Posted June 11, 2011 Report Share Posted June 11, 2011 Perhaps the contractor has a good reason to show maximum gross income on his books. Perhaps the contractor is trying to get the accountant to show more income than actual and the accountant may get sued by a third party. Under this theory, McDonnell Hamburger should give out 1099's for senior discounts. Many seniors visit every day and get discounts. Using the same bogus theory you would depreciate the sticker window price on purchase of a new automobile with a 1099 issued by the dealer. Quote Link to comment Share on other sites More sharing options...
jainen Posted June 11, 2011 Report Share Posted June 11, 2011 >>Under this theory, McDonnell Hamburger should give out 1099's for senior discounts.<< I love your entire answer, OldJack! Why, I might make a cynic out of you yet! Of course that won't stop me from mocking you anyway. McDonnell doesn't incur any expense related to that discount. A better analogy is Bugger King. They give out those golden cardboard crowns, an obvious advertising expense. Quote Link to comment Share on other sites More sharing options...
OldJack Posted June 11, 2011 Report Share Posted June 11, 2011 McDonnell doesn't incur any expense related to that discount. They purchased and printed the sandwich wrappers, much the same as this contractor's sign. Both get their advertising material back from the customer. Hee Hee! Quote Link to comment Share on other sites More sharing options...
jainen Posted June 12, 2011 Report Share Posted June 12, 2011 >>the same as this contractor's sign<< It is NOT the same. They don't say, "You can save a macnickel if you promise to leave it on your dashboard for three months." Quote Link to comment Share on other sites More sharing options...
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