chrystyinp,
You state "how the contracting world works".
That appears to makes you situation different from reb's (the original poster) situation. He was a W-2 employee, who got a 1099-misc for expense reimbursement.
In the case of an independent contractor and/or a contract employee, a 1099-Misc is usually correct for expenses. The "employer" should report all payments to the contractor. It's then up to the contractor to deduct his expenses on schedule C.
You DON'T report the company to the IRS and "let the IRS deal with them". That makes unnecessary effort for you, the company and the IRS and guess who the IRS is going to mad at! You simply deduct it on the schedule C you already have to prepare.
