1099misc issued after termination reimbursement for agreed upon 3-month cobra INS. payment. Negotiated it 2 weeks after termination and Comp. proc. as expense ck.

[drabowitt]

Two weeks after termination, RIF,  I negotiated with the company to provide me 3-months of payments for my Cobra insurance cost.  They processed the payments to look like an expense reimbursement.  I just received a 1099misc from company for the total amount that they processed as an expense payment.  Is this correct for them to do as it was not income but went directly to pay Cobra? 

[ToddL · Accepted solution]

It was still taxable income to you (and an expense to them). 

Even though you directed that payment go to your Cobra insurance provider, the insurance was a personal benefit to you paid for by funds made available to you from your former employer.

You want to make sure you enter the Form 1099-MISC so it is not treated as self-employment income. If you are using a TurboTax product, it gets entered as "Other Common Income > Income from Form 1099-MISC". 

Make sure you answer the interview questions to show that it was: 

• not related to your job; 
• not related to your work; 
• a one-time payment (you never got in the past and don't expect in the future and;
• no intent to earn money or make a profit.