I'm aware of the strict definitions that the IRS uses for considering whether someone is an employee or an Independent Contractor. My company was recently sold and has a new Board of Directors. One of the Board members recently travelled to Houston for OTC. He sent us an invoice for two days of consulting fees plus reimbursable expenses. When I informed him that we would set him up as a vendor (so that he gets a 1099 at year-end), he said to make sure that only the consulting fees are included in the 1099. I'm pretty sure that both the fees and expenses need to be included and it's up to him to deduct the expenses on Schedule C of his 1040 when he files his personel income taxes for 2013 (i.e. so that he's only taxable on the consulting fees). Is anyone able to confirm that my understanding is correct and that I MUST include the expenses on the 1099? Or is there any other way to handle this situation?