No, if this is a SPIFF, it does not have to be reported as business income. A manufacturer's incentive payment, commonly called a "spiff" in the auto industry, is a payment for a goal not paid by your employer. For example, if you work for a Chevrolet dealer and receive a bonus from GM (not the dealer) for selling a car, it is a "spiff."
If it is paid by your employer, it may be reported on Form 1099-MISC, box 7 (Non-Employee Compensation). This situation would require a Schedule C.
The expenses that you incur are more than likely expenses that you would normally pay as a result of your employment and consequently would be reported on Form 2106 (Miscellaneous Employee Expenses). See this if you need help with that: https://ttlc.intuit.com/questions/2902800
Please feel free to post any additional details or questions in the comment section.
Generally, enter the 1099-MISC in TurboTax as presented on the paper form. If it requires a Schedule C, TurboTax will create one.
To enter a SPIFF with a 1099-MISC:
While in your return, type “1099-misc” in the Search box and then select the “Jump to” link. This will take you directly to the section where you can enter your 1099-MISC.
On the follow-up screen, enter SPIFF in the blank box, then on the next screen, on the drop down list, check “This was a Manufacturer's incentive payment”
This will put it on line 21 of form 1040 with no Self-Employment tax.
*SPIFF (Special Performance Incentives for Field Force) payments reported on Form 1099MISC; (1) are not treated as wages, (2) are not subject to federal income tax withholding, social security, Medicare, or federal unemployment tax, and (3) are not considered to be self employment income and, therefore, are not subject to self employment tax. Box 3 of the 1099-misc is the correct place for a SPIFF to be reported.
http://www.irs.gov/pub/irs-pdf/p3204.pdf
