@Confused96 wrote:
They stated they will be sending me a w2 as usual and a 1099 just for the training
So that's clearly improper, and it's not taxable to you. The question is how to not get the IRS on your back while it gets sorted out. (The problem with a lawyer is it could cost you more than the amount of the dispute.)
Although there may be other opinions, I would not include the 1099 as taxable income. There are two ways to do this, both of which will likely trigger the IRS to look into it.
a. Enter the 1099 as miscellaneous (other) income, not related to work you did (even though it;s a 1099-NEC). Then enter a negative amount of miscellaneous income as an offsetting adjustment. You can e-file this way. The IRS computer will see that you reported the 1099 as income, so it won't be an immediate red flag, but they will probably ask at some point for an explanation of the negative adjustment.
b. Leave the 1099 off your return, file by mail, include a copy of the 1099 and a written letter of explanation. The. IRS may still ask for information later.
Either way, this is profoundly stupid by the employer. They don't get any more of a tax deduction for 1099 income than they do for training expenses, it just hurts you.
