As this is a partial reimbursement of a non-deductible expense, it would not be taxable. However, you have to report that form 1099-MISC as the IRS has a copy of it.
I would recommend that you enter the form 1099-MISC under Other Reportable Income and then add a line also Other Reportable Income to reverse it by entering a negative amount equal to the amount reported on the form 1099-MISC and describing it as Reversal of 1099-MISC entry as it is a partial reimbursement of a non deductible expense.
In TurboTax, open your return and follow these steps:
- Click on Federal in the left-hand column, then on Wages and Income on top of the screen
- Scroll down to All Income, locate the Less Common Income section
- Click Show more and click Start next to Miscellaneous Income at the bottom
- On the next page, click Start next to Other Reportable Income.
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