1099-NEC Funeral Reimbursement

[JacobR84]

To make a long story short, my father in law passed this last year. He was on workman's comp with our state from an accident years ago that left him completely disabled. Due to the injury, the state was on the hook to cover funeral/burial/cremation costs. My wife covered the expense up front and after battling it with the case worker, they agreed to reimburse for it all. Now she received a 1099-NEC for that amount, when I file that form accordingly with our taxes, it adjusts our Fed return down $1000 and our State down $235 as taxable income when it wasn't really taxable income. It was a reimbursement for something she covered up front. How would I go about properly filing this? 

[ee-ea]

Since you received the 1099-MISC, 1099-NEC or 1099-K (1099-Form) you will need to enter it into your tax return. Because it is a reimbursement, you can subtract the amount reimbursed. If the IRS audits your return, you can show them the situation. You can enter the 1099-Form in the 1099 section or you can enter it in the area where you are subtracting expenses.

Follow these steps:

First enter the income:

1. go to the federal income section

2. scroll to the bottom

3. Miscellaneous Income, 1099-A, 1099-C, Start

4. Scroll to the bottom

5. Other reportable income, Start

6. Other taxable income?

7. Select YES

8. Description 1099-Form, box 3

9. Amount, enter your amount, $1200

10. continue

Subtract expenses

1. Miscellaneous Income, 1099-A, 1099-C, Start

2. Scroll to the bottom

3. Other reportable income, Start

4. Other taxable income?

5. Select YES

6. Description 1099-Form expenses

7. Amount, enter your amount, must be less than or equal to the amount on the 1099-Form as a negative, -1200

8. continue