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Self employed
Are you referring to a Health Reimbursement Arrangement? If yes, such plans are offered by employers to help their employees pay for healthcare expenses. Such reimbursements are generally tax free if used for qualified medical expenses. Thus, this reimbursement you received may not be taxable income and thus, does not need to be reported on your tax return.
The March 2022 report from the Congressional Research Service provides the following regarding HRAs.
As an employer-provided benefit, an individual’s eligibility to receive HRA contributions is tied primarily to whether the individual works for an employer that offers such a benefit. If an employer offers such a benefit to its employees, the employer contributes money to an employee’s HRA and then reimburses the individual for any qualified medical expenses he or she incurs, so long as there is a balance. Employer contributions to an HRA are excluded from an employee’s gross income and wages (hence are not subject to income or payroll taxes), and distributions from such arrangements for qualified medical expenses are tax-free. Only employers can contribute to HRAs.
Congressional Research Service Report
You might consider double checking with your employer whether you need to report this 1099-MISC; however, it appears that this is non-taxable income.
After further review and consideration, because you have received a 1099-MISC, and assuming this payment to you represents tax free income, then you should report the 1099-MISC on your return as "other income" and then also report an equal offsetting amount, again as other income. These entries (assuming this 1099-MISC represents tax free income) will offset one another. The offsetting amount gets reported as a negative number.
To report this 1099-MISC as other income, follow these steps:
Here are the steps to enter the 1099-MISC as other income:
- To enter other income in TurboTax online, click on Wages & Income, left side of screen.
- Scroll down the page to Less common income, click on the drop-down arrow and select Miscellaneous Income.
- From the list select Other reportable income and respond to the questions on the screens that follow.
- On the screen, Other Taxable Income, you may see information indicating that you should not report a 1099-MISC in this section. Just ignore that statement and enter your information.
- Now, go back and repeat the same steps, but enter the 1099-MISC amount as a negative number.
If you are using TurboTax CD/download, the process is similar. After selecting the Personal tab, and the Personal Income tab, scroll down the screen to Less Common Income, and select Miscellaneous Income. Enter your information.
[Edited 4/13/2023 | 8:30am PST]
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