Is mileage that was reimbursed and included on 1099 counted as taxable income?

[IsabellaG]

Yes, it's included in your taxable income, because that's how it's being reported to the IRS. But you can deduct business mileage as a business expense, which will subtract it from your taxable income.

But in order to report your income and expenses from a 1099-MISC, you'll need to use TurboTax Self-Employed.

[rkjustice]

Can you explain this a little more for me?  I had typically not had mileage reimbursed on my 1099's.  This past year, I worked as a contractor for a company and they reimbursed me for the mileage and that reimbursement was included as income.  I am unclear how to document that to offset on my tax return.

[LinaJ2020]

When your employer includes the reimbursement as part of your wages on the Form 1099-MISC, you do not need to document it anywhere on your tax return.  All you need to do is to report your entire amount of income from the 1099-MISC as part of your self-employed income and then enter those mileage expenses along with you other related business expenses on a Schedule C.  This would be your off-set.  Just make sure to keep all the records in case IRS asks for proof later.

In TurboTax online, simply follow these steps:

• Sign in to your TurboTax account and select Pick up where you left off
• At the right upper corner, in the search box, type in "1099misc" and Enter
• Select Jump to 1099misc
• Follow prompts 
• If you are not in the self-employed edition, you will be prompted to upgrade.
• Follow prompts to complete

@rkjustice

[Kdovel3]

I file using your Home & Business program because I have income from my business. I also have 1099 income from other work that includes mileage reimbursement. Can I continue to use Turbo Tax Home & Business ?

[Opus 17]

@Kdovel3 

If you have a self-employment business, and you have 1099 income from “other work“, then you have two businesses. You can still use the TurboTax Home and Business version, but you need to list the businesses separately. This will create 2 schedule Cs in TurboTax, one for each business. You must allocate expenses and income to each business as appropriate.

[VolvoGirl]

To add another business or Schedule C….

Go to Business tab-Continue

Business Income and Expenses

Profit or Loss from Business, click Start or Update.

You should see the Business Summary page that lists your businesses, right below the list you can Add Another Business.

Be sure to add it under the right spouse if you are married.

[JHew92]

(I read on another post that when you use your personal vehicle for work that it can be as if you are renting it to your employer versus being classified as self-employed. It’s frustrating that my husband’s employer decided not to take taxes out and 1099 us for vehicle reimbursements. Is there an easier way than having to file like we are “self-employed” when we aren’t? We paid for tires, repairs, and even insurance on his vehicle used for work plus all the miles racked up.) 

Update: It’s been brought to my attention that I really wasn’t clear here. I left out a bunch of details. My husband has worked for a company for over 10 years. They had provided company vehicles up until last year when they instead offered a car allowance to my husband. He purchased a vehicle and covered his own auto insurance and maintenance in 2021. Yet, we did not know they were not taking out taxes and they were going to 1099 us at the end of the year. So, now when I try to fill out my tax return and put in the “other income”, we are being charged self-employment tax when we are NOT self-employed. It kind of defeats the purpose of the car allowance when seeing how much we will be charged. Does anyone know what my husband’s employer would need to do to amend the W2? I’d like to have it solved and say, “Ok, this is all you have to do…” Everyone is under a lot of stress.
If I can’t get it amended, I still don’t understand how to enter the income to where it doesn’t trigger the system to think we have a business. Or are we forced to be considered “self-employed” ?  I am not trying to avoid paying taxes. Yet, I don’t want to pay more than I should. Hope that makes sense. 

[Opus 17]

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@JHew92 wrote:

I read on another post that when you use your personal vehicle for work that it can be as if you are renting it to your employer versus being classified as self-employed. It’s frustrating that my husband’s employer decided not to take taxes out and 1099 us for vehicle reimbursements. Is there an easier way than having to file like we are “self-employed” when we aren’t? We paid for tires, repairs, and even insurance on his vehicle used for work plus all the miles racked up. 

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No, you can't call yourself a schedule C business who is in the business of "renting" your personal vehicle to the employer.  That's tax fraud.  I am 100% certain your husband's employer will not sign a rental agreement, for example.  For 2018-2025, W-2 employees can't deduct work-related use of their personal vehicle, that's all.

Note that in some states, it may be illegal for the business to require the unreimbursed use of a personal vehicle, especially if the unreimbursed vehicle costs reduce the employee's net income to below minimum wage.  Otherwise, look for a job that treats you more fairly. 

[JHew92]

Thank you for your reply. I’m not looking to commit tax fraud. I’m just wondering how to report this properly (and legally) since my husband is NOT self-employed yet it seems like a 1099 makes it look like he is. As you can tell, I’m not an accountant. I don’t even know what a Schedule C business is. Guess I’m going to have to hire someone. And, yes, his employer’s wife controls the books and this is her terrible handiwork. She’s not interested in amending his W-2 to make it right either. Totally frustrated. 

Do you know where I can read up on how she should have reported any vehicle allowances she gave him? My husband is going to have me try and put together something to show her and ask if she’ll amend the return. It’s probably a long shot, but this just wasn’t right especially if we can’t deduct all the other expenses we had using our vehicles for them. 

[Opus 17]

@JHew92 

I’m not clear on what you are asking. First, you asked if there was a way you could get reimbursed for your husband‘s business use of his personal vehicle by creating a fake business and “renting” the vehicle to the employer. Now you are asking about employer reimbursements.

A W-2 employee cannot claim tax benefits for the business use of a personal vehicle. You also can’t “rent“ your vehicle to the business and get some kind of fake tax benefit for it.

A business may reimburse an employee for business use of a personal vehicle in one of two ways.  If the business has an accountable plan, this means that the business reimburses the employee only for business miles that are proven with some kind of documentation, such as a logbook or a diary. The business may pay up to the IRS standard mileage rate, which was 58.5 cents per mile through June 2022, and was raised to 62.5 cents per mile starting July, 2022.  The business may pay less than the standard rate, of course. If it pays more than the standard rate, the excess must be reported as taxable income.  The business may pay in advance if it wants, but to be considered an accountable plan, the business must periodically reconcile any advance payments with the diary or logbook that proves the expense, and the business must take back any excess amount.  

Or, a business may pay an employee under a non-accountable plan.  Under a non-accountable plan, the employee is not required to keep track of their miles and prove them to the business. The business simply pays whatever it feels like paying. Under a non-accountable plan, any reimbursement paid by the business must be included in the employee’s taxable wages and should be included on their W-2.  If the employer gives a reimbursement under a non-accountable plan and does not included in the W-2, there is a way to add the wages in TurboTax.

[JHew92]

I’m sorry I wasn’t clear. I had a huge headache from it all and didn’t know how to explain it.

My husband has worked for the same company for 10 years and last year was the first year he used his own vehicle and they gave him an “allowance”.

I didn’t expect to get a 1099 at the end of the year. I thought it could potentially show up on his W2. I wasn’t sure. They had provided all of his vehicle expenses including insurance previously. He does a lot of driving as a superintendent. 
What is confusing to me is when I select to input the 1099-MISC form as “other income” not self-employment, TT still treats it and labels it as “self-employment”. In fact, I get prompted to purchase a more expensive “self-employment” tax preparation software package by TT. Am I doing something wrong?