This income may indeed be subject to Federal income tax as well as self-employment tax. Is that what you mean when you say 'would include it twice in our taxes'? Please clarify.
Perhaps this was an attempt to reimburse your spouse outside of an employer accountable plan. An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income. This means that reimbursements are not subject to withholding taxes or W-2 reporting.
I agree with @ColeenD3 that this rightly sounds like income that should have been reported as income on your spouse's W-2 or subject to income tax and self-employment tax if reported on an IRS Form 1099-MISC.
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