Question

1099-MISC for business expenses

Forum|Forum|5 years ago
March 16, 2021
1 reply
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Hello,

I received a 1099-MISC from my W-2 employer to cover my field sales rep expenses. Can I itemize my deductions for that income with self-employment (1099) deductions, or are they limited to what is allowed under a W-2 employee? As a field sales rep I have mileage, meals, home office, internet/phone, biz related software, storage fees, meals and more. I know that a W-2 employee is not allowed to write off a home office, so I'm confused as to where I need to account for these otherwise normal biz expenses. I have an LLC and have been 1099'd in the past, so I'm trying to navigate this new hybrid W-2 & 1099-MISC tax reality wisely and with the greatest tax advantage. I do have a separate coaching business too. Do I need to do my write-offs under the coaching business to shield my tax exposure? Thanks!!!

Not A Product Question

O

Opus 17

Employee

If you are a W-2 employee, you are not allowed to deduct any work related expenses. All compensation paid to you for any reason for your services must be reported on your W-2. Your company erred by also issuing a 1099.

If your expenses were reimbursed by an accountable plan, which means that you were only reimbursed for work-related expenses that you prove by means of receipts, then the reimbursements do not have to be included in your taxable income at all. Someone at your employer needs an education, and they need to cancel the 1099 entirely. If the reimbursement was through a non-accountable plan, which means that you were not required to prove expenses in a timely manner and the employer simply gave you extra money for your presumed expenses, then the money is indeed taxable, but it must be included on your W-2 and not paid separately. In TurboTax, after entering the 1099 – MISC, there is a list of special circumstances and you will check the box for “this money was paid to me by my W-2 employer and should have been included on my W-2.“ TurboTax will prepare and include form 8919 with your tax return to collect the employee share of Social Security and Medicare tax (7.65%) instead of you paying 15% self-employment tax on a schedule C. You are not allowed to deduct your expenses since you are not supposed to file a schedule C.

If you file a schedule C for a separate job, you can only deduct expenses of that job on that schedule C.

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PressM11Author

This is helpful! In my scenario, this reimbursement was to compensate me for expenses incurred through a non-accountable plan for presumed expenses (my expenses exceeded the amount on the 1099-MISC). I understand that there is a difference in my employers share of Social Security and Medicare instead of me paying 15% self-employment tax on a Schedule C. The question I still have is one of business write offs with a W-2 employee. You mentioned that there are no work related expenses for a W-2, however I see in TurboTax there are questions related to "employment expenses for W-2 work." They list vehicle expenses, travel, job related equipment, work related meals and home office expenses. They added that this doesn't cover any Self Employed (Schedule C) or 1099-MISC work expenses or teacher expenses. Can you elaborate on the differences or nuances? I have over 18,000 business miles driven, and loads of other business expenses that I used to write off as a 1099 contractor for the last 7 years, so this is all new to me. Thank you!

O

Opus 17

Employee

Work-related expenses for W-2 employees are a miscellaneous itemized deduction subject to the 2% rule. This deduction was eliminated for tax years 2018-2025 as part of the tax reform law that doubled the standard deduction in 2018. Turbotax still allows you to list the expenses because some states still follow the old rules. If you list your expenses, they will flow through to the state tax return and might give you a deduction there (depending on all your other facts and circumstances) even though they are not a deduction on your federal return.