Is there a different way to record the expense so I get the full deduction? FYI, our client pays a flat fee for each restaurant evaluation and they don't reimburse us for the meal expense. However, I believe that if I record an IC's reimbursed meal as a company expense, I would only get to deduct 50% of the expense per IRS regs. Instead, we typically record reimbursed IC expenses (travel, hotel, etc.) as a direct company expenses. While we reimburse the IC's for their meal purchases, we don't plan to include those amounts as income on their 1099's.
There are other requirements involved with insuring that an audit will uphold your relationship to the contractor as being independent - see the are a market research company that recently started to hire independent contractors to evaluate restaurant customer service.
Your having the original receipt means the IC will not also claim the expense. If you are going to pay their meals, then you must get the original receipt to claim it as an expense for your company. This bill is a paper trail you need to substantiate the expense in an audit. Then you pay the bill using an expense account mapped to the 1099 block 7. They in turn bill you for their services, which typically includes, materials, mileage, meals, and mark up. The IC you hire is supposed to be in business for themselves, as such they have business expenses. Are a market research company that recently started to hire independent contractors to evaluate restaurant customer service.
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