I received a 1099-MISC for reimbursed expenses

[reb]

I received a 1099-MISC with box 7 filled in from my company. This amount however is for reimbursed expenses (plane ticket, hotel, food) I spent out of pocket for work. I worked as a FTE for the company, not self-employed/contractor/freelance. I'm wondering if this was a mistake? I've never received a 1099-MISC before for reimbursement, this makes it look like I was being paid more money per year than I actually was. And it makes it look like I didn't pay taxes for this reimbursed amount. 

[Hal_Al · Accepted solution]

Yes, it was a mistake and you can try getting your employer to correct it, but they'll, most likely, just tell you that's the way it is. But, that may be be a bad thing. The IRS considers anything in box 7 of 1099-MISC to be self employment income. Enter the 1099-Misc income, at the 1099-MISC screen under "Other Income"/1099-MISC, select "My Business". TurboTax (TT) will complete Schedule C for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security) on any profits greater than $400. The good news is: by doing it this way you get to deduct your travel expenses directly from the income, on schedule C. If you report the income any other way, your expenses are only deductible as an itemized employee expense, subject to the 2% of AGI threshold. Since this "Business activity" is "not for profit", you may not deduct more than the 1099 amount. That is, you can't show a loss. If your expenses do exceed the 1099 amount, you could theoretically deduct the excess as an itemized deduction, but it's unlikely that you would exceed the 2% of AGI threshold.

[reb]

That's the thing, I wasn't self-employed. This was all for my FTE job. I just got an email from the company's tax accountant, and they said they are sending me a corrected 1099-MISC... Now i'm not sure if I should if I should still fill turbotax in, send it out, and amend once the corrected 1099-misc comes in. Or if I should just wait to file once the 1099-misc has been corrected, so I don't have to fill it in at all? Any advice?

[Hal_Al]

You should wait for the corrected 1099, so you don't have to mess with it at all.

[watedrow]

Well being that you are a fte, you paid out of pocket but then paid back by the employer, now you get to handle the write off end of thing. Just go ahead and list it as a business expense. The program will ask you if it was reimbursed which it was and thatshe all. In the future have your employer prepay these fee's. You won't be in this situation next year

[reb]

Hmm.. so I just received an email from my company's tax accountant, and was told that it was a mistake and they are going to send me a corrected 1099-MISC which will reflect $0.00 on the form. Should I still fill this in in turbotax, send it, then amend once the corrected 1099-MISC comes in? or Should I wait until my company corrects it, and not fill it in turbo tax as it will be $0.00? How should I go about this?

[chrystinp]

I am amazed at these responses indicating a 1099 was, indeed, correctly issued.  It clearly was not.  A 1099 is NOT issued for reimbursed expenses. 

From the IRS Instructions:  Employee business expense reimbursements. Do not use Form 1099-MISC to report employee business expense reimbursements.

In terms of reporting, I would not put it into the tax program at all.  The revised 1099 is on file in your account and the IRS auditors have access to it. 

[SweetieJean]

Except that the IRS computers are going  to spit out an automatic letter to the taxpayer, which he/she is then going to have to deal with.

[Hal_Al]

chrystinp is correct, a 1099-Misc should not be issued for business expenses. But, it's frequently done and it's far less frequent that an employer will correct it, when the employee points it out. So, this just explains how you handle it, once you're stuck with it.
In reb's case he was able to get the employer to correct it. He should  wait until his company corrects it, and not enter it in TurboTax (TT)at all, as it will be 0.  That may also save him from having to use a more expensive version of TT in 2014 (all other years, a lesser version of TT could be used).

[chrystinp]

If an amendment was filed by the company the IRS program should NOT spit out a letter.  But if it does, you simply respond that the company incorrectly completed the 1099 erroneously and provide a copy of the revised 1099.  An employer HAS to correct the 1099.  It's the LAW.  If they don't, you report the company to the IRS and let the IRS deal with them.  And for the person who stated have the company prepay, they obviously don't have a clue regarding how the contracting world works.

[Hal_Al]

chrystyinp,
You state "how the contracting world works".
That appears to makes you situation different from reb's (the original poster) situation. He was a W-2 employee, who got a 1099-misc for expense reimbursement.
In the case of an independent contractor and/or a contract employee, a 1099-Misc is usually correct for expenses. The "employer" should report all payments to the contractor. It's then up to the contractor to deduct his expenses on schedule C.
You DON'T report the company to the IRS and "let the IRS deal with them". That makes unnecessary effort for you, the company and the IRS and guess who the IRS is going to mad at! You simply deduct it on the schedule C you already have to prepare.

[TaxGuyBill]

@Hal_Al :  Although reimbursed expenses are usually put on the 1099-MISC for an independent contractor, that is usually not correct.  If expenses are reimbursed under an accountable plan, they do not go on the 1099-MISC, even if the taxpayer is an independent contractor.

[chrystinp]

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