Stuart O. Bronstein wrote:
- quote -

Both your response and the other, and my initial instinct
plus what I would do if the payment weren't to an attorney,
all seem to agree on reporting ONLY the net amount (choice
#3).

However, in reading the history of why attorneys get 1099'ed
EVEN if they were incorporated and the use of the new box 14
("other payments to attorneys") which say that GROSS
payments are reportable, this got me thinking that for an
attorney payee, reporting only the net amount for the year
may be wrong. That's why I asked the question - to see what
others thought. Additionally, this isn't an overpayment and
refund situation, but a situation where the attorney is
entitled to his FULL fee and the rebate exists as a separate
transaction (from the same matter). From the bookkeeping
point of view of the attorney, I would see this as
necessarily reporting the FULL amount in gross income, and
the settlement of the error as a "return or allowance"
deduction, and for the client, possibly a deduction in FULL
(as it was a business case) and recognizing the rebate as
"other income," alternatively as a net deduction; I'm not
certain here. [If the rebate occurred in a different tax
year, I would apply IRC 111 to determine its inclusion.]

I just want to make certain that despite my opinion and
reservations, that you still feel that only the NET need be
reported (in 1099-MISC Box 7).

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:

- quote -

I don't do returns so I may be off base, but my initial
reaction is to treat it as a refund and just have the client
issue the 1099 for the net amount.

Stu

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D. Stussy wrote:

- quote -

Dave,

net amount is sufficient, thus no 1099 from attorney to client.

Cheer$,
Harlan Lunsford, EA n AL

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Client (a non-attorney) pays an attorney amount "X" for a
BUSINESS related matter. The attorney makes a minor
screw-up and settles with the client by rebating amount "Y"
(less than "X" but greater than $600.00) to avoid invoking
an errors/omissions insurance claim. Both transactions
occur in the same calendar year. How should the 1099-MISC
be prepared?

1) Box 7 = "X" and box 14 = 0. (All reportable as gross
income to attorney, rebate ignored)

2) Box 7 = "X - Y" and box 14 = "Y". (Only net amount as
gross income, amount rebated as other payment to attorney)

3) Box 7 = "X - Y" and box 14 = 0. (Only net amount
reportable at all, rebate ignored)

4) Some other combination of amounts and/or boxes.

Question 2: Does the attorney have to file a 1099-MISC to
report the settlement payment of the error/omission to his
client? Box 3 or elsewhere?

I believe that the situation here should be sufficiently
clear of any differences in states' law or appelate court
decision differences.... Thanks.

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