Can I exclude reimbursed expenses from my 1099-NEC income?

[alisrose1]

My employer reimburses me for supplies but includes that money in my paycheck. Can I remove those payments from my 1099-NEC income?

[MaryK4]

No, if your employer reimbursed you for expenses even if they are included on your W2 you should not be using or deducting such supplies for your self-employment income.  

[alisrose1]

To be clear, the payment for the reimbursed supplies is not on a W-2, it's on a 1099-NEC. Why do I have to pay taxes on something that is not income?

[DawnC]

Because they did not include the reimbursement on your W-2.    If you have an employer who issues you a W-2, they should have put all of your income on the W-2.    Form 1099-NEC is generally self-employment income that gets reported a Schedule C.    

If all of your income in on Form 1099-NEC, report all of your income on on Schedule C and deduct and business expenses from that income.   You will pay self-employment tax on the NET income, after expenses.    If those supplies were used while producing your self-employment income, those are deductible expenses.

How is being self-employed different from being an employee?

If you're self-employed, you get to claim expenses related to your work. Common expenses for the self-employed include:

• Car and truck expenses
• Gas
• Office supplies
• Mobile devices
• Web hosting
• Marketing
• Travel
• Supplies

[rethroga]

I'm photographer self employed contracting out to primarily out to one company.  I do not recieve a W-2...  Only a 1099-NEC.   I'm paid for services and expenses.  Are my expense reimbursements included in box1 of the 1099-NEC I receive?  If so then do I need to claim them when filing to get my adjusted gross income to reflect only payment for services?

[VolvoGirl]

They might be included in the gross 1099NEC.  You need to report the whole 1099NEC as income.   Then you can enter the expenses you paid (even if you were reimbursed for them).  It will all wash out.  You only pay tax on the Net Profit after expenses.  

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version or use any of the Desktop CD/Download programs.

How to enter self employment income

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small and if you don't get the 1099NEC.

You use your own records.  You are considered self employed and have to fill out a schedule C for business income.   You use your own name, address and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all income is At Risk.   

After it asks if you received any 1099Misc or 1099NEC it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

Publication 463 Travel, Gift, and Car Expenses

https://www.irs.gov/pub/irs-pdf/p463.pdf

[rethroga]

Thanks Volvo Girl for all the detail!  Followup question, first, full disclosure - I'm not the contractor photographer - it's my son.  I did his 2021 taxes but didnt claim any expenses thinking the 1099-NEC would only have payment for services - and he said he had been reimbursed for all expenses.  But I started thinking that maybe box 1 included both payment for service and reimbursement for reported expenses.  You started your response with the statement "They might be included in the gross 1099-NEC".  How do you know for sure?

[VolvoGirl]

Ask the company.  I bet the reimbursements are included on the 1099NEC.   And he should have his own records to check.  He should know what he got for services even without the 1099NEC.  He should be keeping track of his income and expenses.   So he can match it to the 1099NEC or if he doesn't get a 1099NEC from someone.   He has to report all his income.  

He should amend to add the expenses.  Did you get a Schedule C for his self employment income?  

[rethroga]

Thanks - this helps a lot!!!  I'll check his records -and likely amend.  

[Carl]

The one question where the correct answer matters.

Does the 1099-NEC include the amount you were reimbursed?  Simple yes or no will suffice here.

[rch75]

Is there a spelling error or grammatical error in this answer: "If all of your income in on Form 1099-NEC,"?

1099 "employers" putting expense reports on the 1099-NEC shifts the burden onto the contractor to not just keep those receipts and file an expense report at the end of the month, but now they have to click through pages and pages of TurboTax to find where to put those expenses, probably re-log into TurboTax a bajillion times and answering the same questions repeatedly while trying to enter the data, and now we have to keep those receipts not for a month, but for years for the IRS's potential audit

[chicnfeed]

This answer is incorrect and contradicts another section talking about 1099-NEC that includes reimbursed travel expenses.

[chicnfeed]

Here is the correct answer!

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/1099-nec-reimbursed-expenses/00/...

[RobertB4444]

This answer is correct.  It is also the same answer as the one given by @VolvoGirl above.

@chicnfeed