Received 1099-NEC For Reimbursement Of Costs Associated With Relocating

[0bnxshs]

I received a 1099-NEC from the developer of my multi-family condo building because they reimbursed me for expenses I incurred because they made my home unavailable to me for 3 nights while doing "warranty repairs" to my unit.  I had hotel expenses that they paid.

This hardly seems like reportable income and yet I have a 1099-NEC from them for this amount.   How should I handle this?

[CesarJ]

This is likely a reporting error by the developer, as reimbursements for personal living expenses due to repairs are generally not taxable income. Since a 1099-NEC was filed, you must report it to avoid mismatches, but you should counteract it to avoid paying tax on it by reporting it as non-taxable reimbursement or offsetting it with expenses.

How to Handle the 1099-NEC:

Request a Correction: Contact the developer and ask them to issue a "Corrected" 1099-NEC showing $0, as this was a reimbursement for personal expenses, not compensation for services.

Report as Non-Taxable/Reimbursement: If they refuse, you can file your tax return without including the amount as taxable income, but you must attach a statement explaining that the amount was a reimbursement for temporary living expenses (hotel) incurred due to construction, and thus not taxable income.

Alternative Reporting: In TurboTax, you can enter the 1099-NEC as reported, but then list the exact same amount as an expense, ensuring the net taxable income from this transaction is $0. Report the 1099-NEC on Schedule C as income, but take an equal expense deduction for "reimbursed expenses" (if you can prove the expenses). Note that this is technically for self-employed individuals.

To report income and expenses from a 1099-NEC in TurboTax Schedule C, follow these steps in TurboTax Online:

1. Go to the Wages & Income section.
2. Find the Schedule C (Self-Employment) section.
3. Start or update your Business Income and Expenses.
4. Enter the 1099-NEC income as business income.
5. Enter any related expenses, such as hotel or repair costs, in the appropriate expense categories.

[0bnxshs]

Thanks for the answer, I thought as much as far as your options.

How would I go about attaching a statement that this is not taxable income but reimbursement for expenses as you suggest in the first option?  

[AmyC]

There are multiple ways to report the 1099-NEC. Since you want to make a statement. this method may suit you better. At the end of the day, the goal is to have the correct income reported. Your form for reimbursed housing is not taxable. It was probably sent to make sure that business could claim the deductions for the money they sent you.

This will be a 2 step process to get everything in place.

Step 1  See another post of mine for how to enter. Your description will be Insurance Reimbursement for housing

Your entry screens may be a little different depending on the program. The key is to be sure you say no intent to earn money and sporadic or only for 2025.

Step 2 remove the income.

1. Reverse the income by scrolling to the bottom section,  Less Common Income
2. Select Miscellaneous income, 1099-A, 1099-C, start
3. Select Other Reportable Income start/edit
4. Other taxable income - select the Add button
5. enter description 
6. enter negative amount, put a minus sign in front of your income
7. done

[0bnxshs]

So, using the Windows desktop version of TurboTax Premier, I see the same screens that the users on your previous post describing how to handle nontaxable income reported on a 1099-NEC and do not see a screen that allows me to enter the reason nor do I see the next "does one of these uncommon situations apply?" screen.  Continuing with the other post, I see that choosing "Hobby" as the reason for the income, I entered the info about the payer and payment and was taken directly to the 1099-NEC summary screen. 

Continuing on, I did enter a negative amount in the "Other reportable income" selection of the "Miscellaneous Income" with the explanation that it was expenses related to the 1099-NEC reimbursement of living expenses while displaced from our home with no intent to earn money.

Thank you for the detailed help!