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New Member
posted Jun 4, 2019 1:58:23 PM

I am a self-employed consultant reimbursed for meals, not included on the 1099 from client. Pub 463 pg 11 part 3 implies these are 100% deductible. Is that right?

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4 Replies
Level 15
Jun 4, 2019 1:58:24 PM

If the reimbursement is not in your taxable income you can't list it as a deduction.  You can't deduct an expense if it was never in your income in the first place.

As long as you followed an accountable plan, where you were reimbursed only for business-related meals and you submitted receipts, and your client only reimbursed you for your actual expenses, then the reimbursement does not have to be added to your taxable income.

If you did not follow an accountable plan, then the reimbursements should have been taxable, you should add them to your taxable business income, then you can deduct 50% of the cost as a business expense.

Level 9
Jun 4, 2019 1:58:27 PM

Sort of, but not really.

If it is not on the 1099-MISC, it seems like you are not reporting it as income.  Therefore you do not report it as a deduction, because you received the reimbursement but are not being taxed on it.

New Member
Jun 4, 2019 1:58:29 PM

That is what I thought (it is not income, cannot deduct as expense).

But the example given in the publication says "You are a self-employed attorney who adequately accounts for meal expenses to a client who reimburses you for these expenses. You aren’t subject to the limitation on meal expenses." This makes no sense if the meal is not deductible as an expense in the first place. It does not actually say anything about how the expense was reported (e.g. 1099). I don't get it.

Level 15
Jun 4, 2019 1:58:29 PM

What that means is that, if your client follows an accountable plan, you can exclude the entire cost of the meal from income, instead of excluding 50% of the cost and reporting 50% of the cost as income.

Normally, anything you get of value from your client is taxable income -- including gifts, gift cards, items obtained in barter instead of cash, paid in bitcoin, etc.  If you make custom shoes and a rancher pays you in leather, you have to report the fair market value as income.  And so on.

That paragraph describes an exception for meals.  If you don't adequately keep track of your expenses, the money your client reimburses you for meals is taxable income, then you deduct 50% of the cost as in the general rules (net result, 50% of the value of the meal is income to you).  But if you do adequately keep track of expenses, you don't have to report 50% of the value of the meal as income.  You can treat the entire reimbursement as tax-free.