5100expenseNormal balance: Debitbusiness5100 — Subcontractors
Subcontractors is built for people who do work for the business without being employees of it — independent contractors billing per project, freelancers on a specific job, tradespeople brought in for a piece of the work. The single most consequential mix-up in this entire chart is confusing this account with Payroll, and it is worth stating plainly why the two are not interchangeable.
As an expense, it carries a normal debit balance like any other cost. The real distinction from Payroll (6700) is not the dollar amount but the underlying relationship: a subcontractor invoices you and handles their own taxes, while an employee has taxes withheld from their paycheck by you. Recording an employee as a subcontractor, or the reverse, is a real compliance problem, not just a bookkeeping preference.
At year-end, anyone paid $600 or more in a calendar year through this account generally needs a 1099-NEC — though the specific threshold and whether it applies at all depends on the payee's business structure (a payment to most corporations, for instance, is typically exempt). Confirm the specifics with an accountant well before filing season rather than assuming.
What belongs here
- payments to independent contractors for labor on a job
- subcontractor invoices covering a defined portion of a project
- freelancers paid per project or per deliverable
- a specialty trade brought in for one piece of a larger job
What does not belong here
- W-2 employee wages — Payroll (6700), an entirely different tax and legal relationship
- a subcontractor's own materials billed separately from their labor — Materials (5200) if broken out
- legal fees paid to a law firm, even though a lawyer is technically a kind of contractor in casual speech — Legal & Professional (6150) instead
Where it shows up
Shows on the income statement in cost-of-sale territory, often grouped near Cost of Goods Sold and Materials since it scales directly with the work being done and sold.
Common questions
- How do I know if someone is a subcontractor or an employee?
- It depends on the actual working relationship — control over how the work is done, who provides tools, exclusivity — not just how you decide to pay them. Misclassifying an employee as a subcontractor carries real legal and tax risk; ask an accountant if it is unclear.
- Do I need to send a 1099 to everyone in this account?
- Generally to anyone paid $600 or more in a calendar year, with exceptions depending on the payee's business structure. Confirm the specifics with an accountant before filing season.