My adult daughter was killed in a car accident. I paid for the funeral expenses upfront ($8k) and then later was sent a reimbursement from her car insurance policy's PIP coverage for the full amount. Car insurance company sent me a 1099-MISC with the $8k listed in Box 6 (Medical and health care payments). When I enter the 1099-MISC, TurboTax treats it as self-employment income and my tax owed goes up by almost $2.7k. The funeral expenses were a covered expense by her PIP policy and I simply facilitated the transaction by providing the receipts to the car insurance company and paying the funeral expenses upfront. I did not know the PIP would pay for funeral expenses until AFTER the funeral. Is this taxable to me?
Is it appropriate to list it as a "Business" on Schedule C and then also list the funeral expenses as a business expense on Schedule C? This would result in $0 profit/loss and not increase my tax owed. It just does not seem appropriate to list my daughter's death/funeral as a sole proprietorship/self-employed business. Any insight is greatly appreciated!
