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tcondon21
Returning Member

Externship - Income and expense reimbursement reported on 1099-NEC

Greetings,
My daughter had an externship in NYC last summer.  She was paid for the 4 weeks she spent there and was reimbursed for a portion of her travel and lodging costs incurred during the externship. The compensation and the expense reimbursement were combined together and reported in Box #1 (Non-employee Compensation) of IRS form 1099-NEC. Is this the right reporting form? Should expenses be included?  It appears to me that from this form her only choice is to report the gross amount on Schedule C (form 1040) as income and reflect expenses to net out to the net amount she received. That might be aggressive as I am not sure that travel and lodging costs for this would be deductible on Schedule C. Any thoughts on this would be welcome. Trying to get the company's CPA to share a bit more of their thinkng but so far, not much.

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3 Replies
DavidD66
Expert Alumni

Externship - Income and expense reimbursement reported on 1099-NEC

You are correct in your thinking on how to report the Form 1099-NEC and the travel expenses.  They should all be reported on Schedule C.   If the expenses exceed the revenue reported, your daughter will show a loss.  If the revenue (amount reported on Form 1099-NEC) is more than the expenses, that "profit" will be subject to income and self-employment tax.    

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tcondon21
Returning Member

Externship - Income and expense reimbursement reported on 1099-NEC


Thanks David - it might be a stretch to deduct the costs (it won't be a loss, but it will eliminate much of the income).  Seems like if you accept an externship in NYC, then that is your place of work such that travel and lodging costs would be non-deductible commuting expenses. Small amounts so likely its worth filing as you described on Sch C including the income and deducting the cost. Gross proceeds under $11,000 and costs between $6,500 and $8,000.

DianeW777
Expert Alumni

Externship - Income and expense reimbursement reported on 1099-NEC

Yes, as indicated you would be allowed to deduct any amount for travel expenses that is part of the income reported on the 1099-NEC.   Also, if there were expenses your daughter had that were not reimbursed, she would be allowed to deduct those as well. Necessary and ordinary items might be notebooks or accessories that were useful in her ability to earn the income.

@tcondon21 

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