[adolm]

Healthcare company X has four independent contractors, A, B, C, and D. Each contractor receives payments from insurance companies in their own name, which are signed over to Company X each month. Company X then cuts a check for the contractors for the amount of the checks received, less a 20% fee for administrative costs, building fees, etc. The insurance companies send 1099s to the independent contractors at the end of the year for the total amount paid to them over the year (co-pays + insurance reimbursements). Does Company X also need to give each contractor a 1099? If not, how should the payments be accounted for in Company X's books?

[adolm]

Note: This isn't some kid's homework, but an actual issue I'm currently facing. I'm specifically trying to be vague about the company.

[ArcSine]

Just as a pure guess, I'd say that

• no, X would not 1099 the independents, as they're already being 1099'd from the original payers;

• the ICs would pick up the gross pay from the insurance companies (matching the 1099s) as revenue on their own Schedule Cs;

• the ICs would also show the 20% fee as a deductible expense on their Sch Cs; and

• Co X would net the checks in and the checks out (resulting in a net = the 20% fee) as some sort of fee income.

There's a "Taxes" topic in this forum under the Money & Services group; I'd suggest putting your question over there, as there are some tax whizzes floating around over there who could probably serve up a better answer. Good luck with it.