What do I claim on my income taxes if I pay people for referring clients or finders fees?
I have a business and at times I give people a percentage for referring clients or finders fees from deals that I make. What do I claim on my income taxes if I pay people for referring clients or finders fees?
Public Comments
- Show it as outside commissions paid. If you pay anyone $600 or more, you MUST prepare a Form 1099-MISC and give them a copy. The 1099 is optional if you pay them less than $600 in any tax year. TIP: Before paying ANYONE, give them a Form W-9. Require them to complete and return it BEFORE you pay them anything. Failing to get and report their TIN will cost you penalties from the IRS.
- You can deduct it on your return (Schedule C, 1120, 1120S or 1165). What form depends on how you are set up (Sole Proprietorship, Corporation, Partnership). Note: If you pay anybody over $600 in the year, you must send them (and the IRS) a 1099Misc.
