Taxability of PIP reimbursement for funeral expenses: How to report 1099-MISC Box 6?

[mom2mmk]

My adult daughter was killed in a car accident.  I paid for the funeral expenses upfront ($8k) and then later was sent a reimbursement from her car insurance policy's PIP coverage for the full amount.  Car insurance company sent me a 1099-MISC with the $8k listed in Box 6 (Medical and health care payments).  When I enter the 1099-MISC, TurboTax treats it as self-employment income and my tax owed goes up by almost $2.7k.  The funeral expenses were a covered expense by her PIP policy and I simply facilitated the transaction by providing the receipts to the car insurance company and paying the funeral expenses upfront.  I did not know the PIP would pay for funeral expenses until AFTER the funeral.  Is this taxable to me? 

Is it appropriate to list it as a "Business" on Schedule C and then also list the funeral expenses as a business expense on Schedule C?  This would result in $0 profit/loss and not increase my tax owed.  It just does not seem appropriate to list my daughter's death/funeral as a sole proprietorship/self-employed business.  Any insight is greatly appreciated!

[ColeenD3]

No, this is not a business.  Follow the steps below.

Under Wages and Income, scroll down to Income from 1099-MISC.

• Enter the 1099-MISC exactly as printed, and then Continue.
• Describe the reason for this 1099-MISC: REASON
• Select None of these apply, then Continue.
• Select No, it didn’t involve work….. and Continue.
• Select No, it didn’t involve an intent to earn money, then Continue.
• Do you have another 1099-MISC? Select No, then Continue.

Click the DONE button, and that does it.

[mom2mmk]

I've tried this several ways (including restarting the entire return). 

I go to the "Personal" Tab -> Personal Income -> Other Common Income -> Income from Form 1099-MISC -> "Start", then enter the 1099-MISC info as shown.  The next screen TurboTax displays is "Your Business Status:  The IRS considers the money you earned self-employment income, which is taxable....  Because you have not created any Schedule C on your tax return yet, we'll start one now."  The only buttons on this screen are back/continue.  The next TurboTax screen that comes up after Continue is "Self-Employed Income:  Select the business that generated this income of $..."  It will not let me skip this screen and forces me to select/enter a business name. 

I am never asked to describe the reason for this 1099-MISC or whether or not it involved work or an intent to earn money.  It automatically defaults to a business that has self-employment income, even though everything is entered under PERSONAL Income.  Could this be caused by the fact I have the 'Home & Business' version of TurboTax?  Any idea how to force this into personal income?  Even so, would the insurance money considered taxable to me as it was my daughter's insurance reimbursing my daughter's funeral expenses?  

[PatriciaV]

Insurance proceeds are not taxable income. To correctly report this Form 1099-MISC, first you need to delete your original entry. The 1099-MISC topic will present a summary of all forms entered. Use the Delete button beside the entry you need to remove.

Now re-enter the 1099 as described by Expert ColeenD3 above. To report the expense you paid with these proceeds, enter another 1099-MISC with a negative number in the same income box as on the 1099 you received from the insurance company. This will result in zero taxable income, which is correct for your situation.

[mom2mmk]

FINAL UPDATE:  I was never able to get my version of TurboTax to allow me to do anything other than enter the 1099-MISC as self-employment income.  Perhaps a glitch with the "Home and Business" edition?  I finally reached out to the car insurance company utilizing the information provided on the 1099-MISC form.  They were very apologetic and e-mailed me a corrected 1099-MISC with $0 in all boxes.  They agreed that the money was not supposed to be taxable and the original 1099-MISC I received was in error.  Thank you everyone for your assistance.