Employer gave me a 1099 for expense reimbursement instead of reporting it on my W2

[billpopo]

As part of my regular duties at my job I am required to drive off site. My employer agreed to reimburse me for these expenses and would send me a Venmo for the expenses as they occurred. He does not provide us with pay stubs. When he gave us the tax documents this year I received a 1099-NEC in the amount of the expense reimbursements. I know this should have been reported in box 12 of my W2. How do I account for the reimbursements?

[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. If the IRS audits your return, you can show them the situation. You can enter the 1099-Form in the 1099 section and 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, $$$$$

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, -$$$$

8. continue

[Opus 17]

No, the income is not reported in box 12 of your W-2.

How expense reimbursement is treated depends on whether your employer has an an accountable plan, or a non-accountable plan.

with an accountable plan, you are required to prove your expenses, and your employer is required to ensure that the expenses have a business purpose. This might be through a mileage diary, or a record book that lists the date in business purposes, and mileage of each trip, or you might have an app, or there might be some other way of recording the expenses. You are only reimbursed for expenses that you can prove our work related. Your employer may issue in advance or stipend, but the employer must periodically reconcile the stipend against your actual expenses and if you were over paid, you must pay back any overage.  

if the expenses were reimbursed under an accountable plan, the reimbursements are completely non-taxable. They should not have been reported on your W-2 or on a 1099, there should’ve been no paperwork at all.  Because you received a 1099, you can follow the procedure recommended by the expert to report the 1099, and then zero out the income with a negative entry.

however, if the employer used a non-accountable plan, which means that you were paid for your expenses, but you did not have to prove them and the employer did not require any records, then the reimbursements are considered part of your taxable wages, and they must be reported on your W-2, and are subject to federal, state, Social Security, Medicare, tax withholding. 

in TurboTax, when you enter the 1099 NEC, there is a checkbox for “this was wages from my employer and should have been included on my W-2.“  turboTax will help you fill out a form 8919 to pay the employee half of Social Security and Medicare tax instead of paying double through self-employment tax.

your employer may be subject to an investigation for failing to withhold the correct tax. For that reason, it would be courteous to ask your employer for a corrected W-2 first, if they used a non-accountable plan.

[Mike9241]

your employer is doing it all wrong. under an accountable plan where you submit periodic expense reports to detail those expenses and the employer reimburses you, no 1099 is issued to you. the employer takes the deduction for the reimbursement. for you and the employer a benefit not subject to FICA or medicare taxes.  the 1099 way you report the income on schedule C and take a deduction for those expenses.

 so you net out to zero.