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Miri1018
Returning Member

1099-MISC for COBRA payments

I received a 1099-MISC from my former employer for the exact amount I paid them for COBRA insurance.  How could this be considered income if I sent them the full amount of the premium to cover the insurance?  It doesn't seem logical.  I get it that they gave me a benefit, but the money part is a wash for them, and an expense for me.  Can you please explain what I need to enter when filling out the Turbo Tax questions for this 1099-MISC?  Thank you.

1 Best answer

Accepted Solutions
Critter
Level 15

1099-MISC for COBRA payments

 

Reimbursement of Cobra Premiums Taxable?

If your former employer is reimbursing you for your COBRA payments, this may or may not be considered taxable income. They may report it on your W2 in Box 12 with the code DD which means the amount in the box is the total of what you and your employer paid for your employer-sponsored health insurance for the year. However, amounts coded DD don’t affect the other numbers on your tax return, as they’re for informational purposes only.

 

But sometimes an employer will issue a Form 1099-MISC for the COBRA reimbursements. In this case it would have to be reported as income. It’s a good idea to talk to your former employer’s human resources people to find out how they’re going to handle the reimbursement and then talk to a professional tax preparer.

 

In general, if your company wants to treat this as a non taxable health insurance expenditure, it should either make the COBRA payments directly to COBRA or reimburse you only after you show them proof of making the payments yourself. COBRA reimbursements are not taxable if you’re required to prove to your former employer that you made the COBRA payments before they reimburse you. You should keep documentation of any arrangement you have with your former employer and for each COBRA payment you’ve made and each reimbursement you received.

 

SINCE YOUR EMPLOYER ISSUED A 1099 ... you will need to report it on the return to avoid an IRS letter. 

 

2 ways to handle it ...either way keep good records to support your entry if the IRS was to question it later.

 

1) use a Sch C and enter the same amount as an expense to offset the income

 

2) make TWO   Sch 1 line 8 entries ... one positive and one negative(using the same description) to offset each other

 

You can report it as other income on Sch 1  line 8. Here's how to enter it in TurboTax.

  • Click the Federal Taxes tab ( Personal in the Home & Business version)
  • Click Wages & Income. (Personal income in the H & B version)
  • On the screen "Your 2019 Income Summary," scroll all the way down to the last section, "Less Common Income."
  • Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
  • On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
  • The next screen asks, "Did you receive any other taxable income." Click Yes.
  • On the next screen, "Other Taxable Income," enter a description and the amount. Click Continue.
  • On the next screen click Done.

The income will be reported on Sch 1 line 8 with the description that you entered.

 

 

View solution in original post

2 Replies
Critter
Level 15

1099-MISC for COBRA payments

 

Reimbursement of Cobra Premiums Taxable?

If your former employer is reimbursing you for your COBRA payments, this may or may not be considered taxable income. They may report it on your W2 in Box 12 with the code DD which means the amount in the box is the total of what you and your employer paid for your employer-sponsored health insurance for the year. However, amounts coded DD don’t affect the other numbers on your tax return, as they’re for informational purposes only.

 

But sometimes an employer will issue a Form 1099-MISC for the COBRA reimbursements. In this case it would have to be reported as income. It’s a good idea to talk to your former employer’s human resources people to find out how they’re going to handle the reimbursement and then talk to a professional tax preparer.

 

In general, if your company wants to treat this as a non taxable health insurance expenditure, it should either make the COBRA payments directly to COBRA or reimburse you only after you show them proof of making the payments yourself. COBRA reimbursements are not taxable if you’re required to prove to your former employer that you made the COBRA payments before they reimburse you. You should keep documentation of any arrangement you have with your former employer and for each COBRA payment you’ve made and each reimbursement you received.

 

SINCE YOUR EMPLOYER ISSUED A 1099 ... you will need to report it on the return to avoid an IRS letter. 

 

2 ways to handle it ...either way keep good records to support your entry if the IRS was to question it later.

 

1) use a Sch C and enter the same amount as an expense to offset the income

 

2) make TWO   Sch 1 line 8 entries ... one positive and one negative(using the same description) to offset each other

 

You can report it as other income on Sch 1  line 8. Here's how to enter it in TurboTax.

  • Click the Federal Taxes tab ( Personal in the Home & Business version)
  • Click Wages & Income. (Personal income in the H & B version)
  • On the screen "Your 2019 Income Summary," scroll all the way down to the last section, "Less Common Income."
  • Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
  • On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
  • The next screen asks, "Did you receive any other taxable income." Click Yes.
  • On the next screen, "Other Taxable Income," enter a description and the amount. Click Continue.
  • On the next screen click Done.

The income will be reported on Sch 1 line 8 with the description that you entered.

 

 

View solution in original post

Miri1018
Returning Member

1099-MISC for COBRA payments

Thanks Critter!  (Love your pic!!)   

My former employer did not reimburse me for anything, which is why I a confused about them sending me a 1099.  I had  COBRA insurance through them for a few months after I left the company.  I paid the premium to my former employer and they then paid the insurance company.  The company is small and fairly young, and I am probably the first employee who ever got COBRA.  I can see them being confused, just as I am.  

 

I think your option #2 will work best for me.  I appreciate your guidance.  This has been an especially challenging tax year for me (left the job, sold the house, moved out of state, started a new job, sold stock, bought a house...).  I have very little brain matter left to use for taxes.  (haha) 🤔

 

UPDATE:  Option #2 was successful.

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