1099-MISC for business expenses

[PressM11]

Hello,

I received a 1099-MISC from my W-2 employer to cover my field sales rep expenses.  Can I itemize my deductions for that income with self-employment (1099) deductions, or are they limited to what is allowed under a W-2 employee?  As a field sales rep I have mileage, meals, home office, internet/phone, biz related software, storage fees, meals and more.  I know that a W-2 employee is not allowed to write off a home office, so I'm confused as to where I need to account for these otherwise normal biz expenses.  I have an LLC and have been 1099'd in the past, so I'm trying to navigate this new hybrid W-2 & 1099-MISC tax reality wisely and with the greatest tax advantage.  I do have a separate coaching business too.  Do I need to do my write-offs under the coaching business to shield my tax exposure?  Thanks!!!   

[Opus 17]

If you are a W-2 employee, you are not allowed to deduct any work related expenses. All compensation paid to you for any reason for your services must be reported on your W-2. Your company erred by also issuing a 1099.

If your expenses were reimbursed by an accountable plan, which means that you were only reimbursed for work-related expenses that you prove by means of receipts, then the reimbursements do not have to be included in your taxable income at all.  Someone at your employer needs an education, and they need to cancel the 1099 entirely.  If the reimbursement was through a non-accountable plan, which means that you were not required to prove expenses in a timely manner and the employer simply gave you extra money for your presumed expenses, then the money is indeed taxable, but it must be included on your W-2 and not paid separately.  In TurboTax, after entering the 1099 – MISC, there is a list of special circumstances and you will check the box for “this money was paid to me by my W-2 employer and should have been included on my W-2.“  TurboTax will prepare and include form 8919 with your tax return to collect the employee share of Social Security and Medicare tax (7.65%) instead of you paying 15% self-employment tax on a schedule C.  You are not allowed to deduct your expenses since you are not supposed to file a schedule C.

If you file a schedule C for a separate job, you can only deduct expenses of that job on that schedule C.  

[PressM11]

This is helpful!  In my scenario, this reimbursement was to compensate me for expenses incurred through a non-accountable plan for presumed expenses (my expenses exceeded the amount on the 1099-MISC).  I understand that there is a difference in my employers share of Social Security and Medicare instead of me paying 15% self-employment tax on a Schedule C.  The question I still have is one of business write offs with a W-2 employee.  You mentioned that there are no work related expenses for a W-2, however I see in TurboTax there are questions related to "employment expenses for W-2 work."  They list vehicle expenses, travel, job related equipment, work related meals and home office expenses.  They added that this doesn't cover any Self Employed (Schedule C) or 1099-MISC work expenses or teacher expenses.  Can you elaborate on the differences or nuances?  I have over 18,000 business miles driven, and loads of other business expenses that I used to write off as a 1099 contractor for the last 7 years, so this is all new to me.  Thank you! 

[Opus 17]

Work-related expenses for W-2 employees are a miscellaneous itemized deduction subject to the 2% rule. This deduction was eliminated for tax years 2018-2025 as part of the tax reform law that doubled the standard deduction in 2018.  Turbotax still allows you to list the expenses because some states still follow the old rules.  If you list your expenses, they will flow through to the state tax return and might give you a deduction there (depending on all your other facts and circumstances) even though they are not a deduction on your federal return. 

[PressM11]

Thank you!

[Hal_Al]

@PressM11   said  "however I see in TurboTax there are questions related to "employment expenses for W-2 work."

That question is in TT because some states do allow employee job expenses deductions.

The bottom line for you is: that income is taxable and you get no deductions and you have tp pay your share of FICA.

You should talk to your employer about shifting to an accountable plan. 

[brakesmith]

approx 323 miles in 2020 to take wife for alzheiemer infusions as part of a research program in another city.

Compensation for patient and caregiver issued on 1099-misc. Don't see any way to take that as an expense in Turbotax deluxe yet a possible deduction was mentioned when the the 1099-misc data was inputted. Help!

[Opus 17]

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@brakesmith wrote:

approx 323 miles in 2020 to take wife for alzheiemer infusions as part of a research program in another city.

Compensation for patient and caregiver issued on 1099-misc. Don't see any way to take that as an expense in Turbotax deluxe yet a possible deduction was mentioned when the the 1099-misc data was inputted. Help!

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You can deduct mileage driven to provide medical care as a medical expense included in the schedule A itemized deductions for medical expenses.  I believe the standard rate for medical expenses is 14 cents per mile.

There is no way to deduct any expenses from payments for a medical study reported on a 1099-MISC.  Formerly, that would have been a miscellaneous itemized deduction subject to the 2% rule, but that deduction was eliminated in 2018.  

(If you reported the payment as self-employment income on schedule C, you could deduct the mileage as a business expense.  But you would also pay an additional 15% self-employment tax.  And, it is just as incorrect to declare non-business income as a business to take an unallowed expense deduction as it would be wrong to declare business income as a hobby to save the extra 15% SE tax.)

[brakesmith]

Spent hours Reading through Pub 525, 334, etc but it was Turbotax that led me down the path to Schedule C and Sch SE.  It turns out that participating in the Alzheimers Research project only required entries on Lines 8 & 9 on Schedule 1, then a single entry on line 8 on 1020. What a waste of time. 

Unlike other years, could not file electronically as Turbotax insisted on me inputting data on the annuities funding my 3 pensions that had paid me monthly for the past 15 years of retirement. These companies are all major corporations having qualified plans eg Goodyear, Meggitt, PBGC. I had never been asked for size of annuity that funded those plans and related information in the past. Is this a anti conservative demon at work?

Further, Turbotax insisted on my reentering data for those pension plans again and again yet the data was not lost and showed up on a recap of the 1099's. Not a happy camper this year.