We received a 1099 Misc from our contractor who did some work on our home after a federal declared natural disaster (Tropical Storm Imelda). Our mortgage company sent the contractor a 1099 Misc for the entire amount of the insurance check ($41909.62) we received even though we told them we only paid him $26,000 of that amount. We used the difference of the money to complete the work our selves. Since we did not pay the contractor the full $41,909.62 his CPA told him to send us a 1099 Misc for that amount. The CPA's explanation was that was how the contractor would not have to pay taxes on the full $41, 909.62. The CPA then said we would just fill the 1099 MISC on our taxes but it would not hurt us because we would then deduct everything we paid in order to offset the income from the 1099 Misc. The problem is I can see where to input the 1099 Misc but I cant figure out how to deduct the amount we paid to offset it.
Any help on this is greatly appreciated.
