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You can classify a payment as a reimbursement so it’s excluded from 1099-NEC totals and tax-collection thresholds. Use this when you’re paying someone back for expenses they incurred on your behalf rather than paying them for services.

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What counts as a reimbursement

A reimbursement is a payment that repays a recipient for out-of-pocket costs: for example, travel expenses, supplies, or other business expenses they paid for on your behalf. Because reimbursements aren’t taxable income to the recipient, they shouldn’t be reported on a 1099-NEC. You’re responsible for deciding whether a payment qualifies as a reimbursement. If you’re unsure, consult your tax advisor.

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How reimbursements affect 1099-NEC totals

When a payment is marked as a reimbursement:
  • It displays a Reimbursement pill on the payment row.
  • Its amount is excluded from the recipient’s 1099-NEC aggregation.
  • Its amount is excluded from tax-collection thresholds that trigger W-9 or W-8 requests.
  • It’s flagged in payment exports with a Reimbursement column set to Yes.
Non-reimbursement payments continue to count toward 1099-NEC totals as usual.

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Marking an individual payment when you send it

When you create a single payment, you can mark it as a reimbursement before submitting:
  1. Go to Payments and select Send payments.
  2. Choose the recipient and enter the amount, description, and payment date.
  3. Check Mark as reimbursement.
  4. Review and submit the payment.
The checkbox also applies when you schedule a payment. Each payment the schedule sends is marked as a reimbursement for that recipient. The same checkbox is available when recording an off-platform payment in the external payment flow.

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Marking a row in a payment batch

When you’re building a batch with several recipients, you can mark individual rows before submitting:
  1. Add the recipient and payment details as usual.
  2. Open the row’s overflow menu (the ⋯ icon).
  3. Select Mark as reimbursement.
A green Reimbursement badge appears on the row. To undo, open the menu again and select Unmark as reimbursement.

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Marking payments in a bulk CSV upload

The bulk payment CSV template includes an is_reimbursement column. Set the value to 1, true, yes, or y to mark that row as a reimbursement. Leave it blank or set it to 0, false, or no for a regular payment. The column header reimbursement is also accepted. Example CSV:
Rows marked as reimbursements display the Reimbursement pill in the review grid so you can confirm before submitting the batch. Download the latest template from the bulk upload screen to make sure your column headers match.

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Marking or unmarking an existing payment

You can change a payment’s reimbursement status after it’s been sent from the payment’s details modal:
  1. Open the Payments dashboard and click the payment row to open its details modal.
  2. Find the Reimbursement field.
  3. Toggle the Reimbursement switch on to mark the payment as a reimbursement, or off to remove the classification.
Hover the information icon next to Reimbursement for a reminder that marking a payment as a reimbursement excludes it from tax-reportable payout calculations. Updating the status immediately recalculates the recipient’s 1099-NEC totals and tax-collection thresholds for the year. If you change the status after a 1099-NEC has already been generated, review the updated form in Tax forms to confirm the change is reflected.

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Filtering the payments table to show only reimbursements

To review every payment you’ve classified as a reimbursement:
  1. Open the Payments dashboard.
  2. Click the Status filter above the payments table.
  3. Check Reimbursement and click Apply.
The table now shows only payments marked as reimbursements. You can combine Reimbursement with other status options (such as Completed or Pending) to narrow the results further, and clear the filter from the status pill above the table when you’re done.

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Reimbursements in payment exports

When you export payments to CSV, each row includes a Reimbursement column with the value Yes or No. Use this column to reconcile reimbursements against your accounting records. Karat is a fintech company, not an FDIC-insured bank. Banking and Card services provided by Grasshopper Bank, N.A., First Internet Bank of Indiana, and Cross River Bank, Members FDIC.