1099-Misc Medical Reimbursement

[anniedau]

How to you claim a 1099-Misc when the money you received was not income but a reimbursement for medical expenses? (I used emergency hospital services overseas, had to pay out of pocket, and my insurance reimbursed me)

When I filed it as a 1099-Misc and add the info for box 6 "Medical and Health Care Payments" it only advances me to screens about my business - which I do not have. And it highly taxes it. There are no other options. 

I read through other questions and it was suggested to list this as "less common income" however it clearly states there NOT TO INCLUDE 1099-MISC there. 

Surely there is a way to report this and not have it taxed as it was a reimbursement, not income??

Thank you!

[JamesG1]

The IRS would presume that the payment was taxable income since it is reported on the IRS form 1099-MISC.

Self-employment income requires that you carry on a trade or business and implies an attempt to make money.

If this is not self-employment income, the income could be reported as other income on line 8 of the Federal 1040.

Follow these steps.

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Scroll down to Less Common Income and click on the dropdown menu.
• To the right of Miscellaneous Income, 1099-A, 1099-C, click the Start / Revisit button.
• To the right of Other reportable income, click the Start / Revisit button.
• At the screen Any Other Taxable Income, click Yes.
• At the screen Other Taxable Income, enter a description such as “Medical reimbursement” and the amount.
• Click Continue.

The entry will be reported:

• on line 8z of Schedule 1 of the Federal 1040 tax return, and
• on line 8 of the Federal 1040 tax return.

@Opus17 discusses that the payment should not be taxed at all.  In that case:

• At the screen Other Miscellaneous Income Summary, click Add another Miscellaneous Income item.
• At the screen Other Taxable Income, enter a description such as “Medical reimbursement nontaxable” and a negative amount.
• Click Continue.

Make sure that you keep records of all transactions.  Later, you may need to demonstrate to the IRS that this is not taxable income.

@anniedau [Edited 02/15/24 | 8:07 pm PST]

[anniedau]

Thank you, 

I did submit my form as 1099-Misc and I am getting taxed $350 on the $857 I received as a reimbursement. 

It then asks me about my"business" which is non existent and is asking me for my business name, EIN etc. It looks like I have to upgrade for $89 to add any expenses for my "work." No other way around this? 

[Opus 17]

I'm not clear this is taxable income.  If you were in the US, the insurer would pay the provider directly and that is not taxable even though it is to your financial benefit.  Here, if you submitted receipts and the insurer only reimbursed you for your costs, I don't think that is taxable.  Alternatively, if it is taxable (but you use the medical expenses as an offsetting deduction--which likely won't actually result in a deduction), then it is still not self-employment.

Go to the 1099-MISC interview and answer all the testing questions as No (not your regular work, no profit motive, not similar to other work you do, no expectation of similar income in past or future years.). That should make the income taxable miscellaneous income on line 8z of schedule 1, but should not result in questions about a business, EIN, or self-employment tax.

Then, if you want to take the position that it is non-taxable, you would go back to the miscellaneous income section and enter another item of "other income" with a minus sign to offset the income.  (If the income was $4000, you would enter an extra item with minus $4000 or -$4000 so it would cancel out the 1099.). Use a reason like "non-taxable medical reimbursement." 

[rjs]

The Form 1099-MISC that you received is erroneous. The IRS instructions for Form 1099-MISC box 6 say "Enter payments of $600 or more made in the course of your trade or business to each physician or other supplier or provider of medical or health care services." Since you are the patient, not a physician or other supplier or provider of medical or health care services, the insurance company should not have issued the 1099-MISC. You should make an attempt to get them to issue a corrected 1099-MISC showing zero payment. You probably won't succeed, but it's worth a try.

If the insurance company won't correct the 1099-MISC, do what Opus 17 suggested. Report it as other income, with an offsetting negative entry. For the description of the offsetting entry I would suggest "Form 1099-MISC received in error." That parallels what the IRS says to do for an erroneous 1099-K.