How to deduct medical cost reimbursement from 1099 job

[Mochachica]

I work in a state with no state income taxes. I’m trying to do my federal return, and I don’t see a section to put my medical cost reimbursement from my 1099 employer. They paid me my medical costs after being hurt on the job. Most of my 1099 income from them is the medical expense reimbursement. While using the program, I don’t see anywhere to deduct it in expense section. It says it’s only for select W-2 workers to deduct and teachers. My medical expenses also were not over the threshold to itemize them and deduct in the medical expense section of the program. Can I not deduct this non-taxable pay in the federal program as a 1099. 

[CatinaT1]

Because the IRS gets a copy of that 1099, you must report the full amount. However, since medical reimbursements for an injury are not taxable (even for 1099 workers under IRC § 104(a)), you need to "wash it out" so you don't pay taxes on it.

Your 1099 Income will be reported on Schedule C, but then you will create a custom expense to cancel out the non-taxable portion.

1. Enter the full amount exactly as it appears on the form under Wages & Income > Self-Employment.
2. In the Schedule C interview, look for the section titled "Other Miscellaneous Expenses" (this is usually at the very end of the expense list).
3. Enter a miscellaneous expense titled:  "Non-taxable medical cost reimbursement per IRC Sec. 104(a)"
4. Enter the exact amount of the medical reimbursement that was included in your 1099.

Your net income on your Schedule C will only reflect your actual earnings. You won't pay income tax or self-employment tax on the medical portion.

[Mochachica]

Thank you. Is the schedule C interview in the wages section or the expenses section? I remember in the expenses section it having a miscellaneous section similar to what you mentioned, but it said it was only for W-2 expenses. Unless this is in the wages section and I somehow missed it. I tried to click through everything looking for it.

[DavidD66]

To Enter your medical reimbursements as a Miscellaneous Expense:

• Type "Business Expenses" into Search and hit enter
• Click on the "Jump to business expenses" link
• Scroll down to "Business Expenses" and click on Start next to "Other Common Business Expenses"
• Next to "Other Miscellaneous Expenses" click on Start
• Enter a description and amount for your expenses

[Mochachica]

Thanks, I will try that.