What is the industry standard and/or preferred treatment in paying welders for the use of their welding truck in pipeline construction? 

We are a construction company specializing in Oilfield Construction. We are paying our welders for the use of their welding truck and we treat the payment as a rental payment and issue an 1099 at the end of the year.

This year a CPA preparing the tax return for one of our welders questioned the 1099 and referred me to Rev. Pro 2002-41 which provided an optional expense substantiation rule that would allow us to treat the payment to the welder truck as a non-taxable reimbursement to the welder similar to non-taxable Per Diem. She stated that was the preferred treatment and industy standard.

I would appreciate any response. Thank you

Sylvia, I work for an industrial contractor and we pay our rig welders thier salary out of P/R and thier rig rent out of A/P.  The welder has to turn in an invoice in order to be paid, we also have them sign a contract. 

 I have often thought it would be easier just to pay the rig rent out of PR as non taxable reimbursemnt but worry about audit issues with IRS. 

 Our company was informed many years ago that it could be non taxable rig rent but you have to be careful not to pay higher "rent" and low "salary" or the IRS will assume you are trying to get out of paying employment taxes.  Our rig rent is approx. 1/3 of thier hourly wage.

Thank you Ken for your response, however, our welders are employees, they do not qualify for independent contractor status since they only work for us at the time of their employment. We only issue a 1099 for the welder truck payment

Thank is how I have done it in the past, or on smaller projects they just were treated as independent contractors.  Normally this industry all the welders provide thier own equipment.

Good Luck

Ken