AccountingBLOCK

I just wanted to know just out of curiosity what exactly do people who outsource work do when it comes to recording expenses? Are those expenses even recognized as expenses because I assume people who outsource work do so over email and through the web sending payments through paypal... their is no invoice involved, no employees etc.

Please keep in mind though, I am only talking about people who are in other country so there is no 1099 involved here...

Should this outsourcing expense be recorded as a business expense?

I have never wondered on that one before but lemme think of somethings u can do do...

1) Make sure you save the communications you have with freelancers for atleast 3 years.
2) Use paypal as it saves everything in history so you will know who you paid and when you paid.
3) Treat this as a freelance expense or other expense

Boy this is one loophole IRS hasn't discovered... lucky indians, not paying uncle sam any dollars they are earning

flexdeck literally answered your question but let me go ahead and elaborate a little.

This should be considered other expense or "Outsourcing Expense".

Let me give you an example as I outsource work to people all the time who are not in the U.S.

You get a project to make a website. You ask the client for $500. You get $500, that is your income. I am assuming that you know exactly what you are doing and you don't need any help. Your client calls you and tells you that he wants you to write a press release also and because this client is very loyal, you say that you will take care of it. Now you have to do something that you don't know, you have $500. You hire someone else because you want quality work and pay that person $20 to write a press release. That is the expense you incurred during the project.

I hope that made sense...

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Zahid H. Lilani

Technology sure is making life difficult for accountants lol