I received a 1099-NEC including reimbursed expenses

Forum|Forum|4 years ago
March 22, 2022
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I received a 1099-MISC for reimbursed expenses

I received a 1099-NEC which includes both my contract fee, and an amount for products I purchased for their use. This is a pass-thru expense, not for my use, I did get reimbursed but how do I write off the original cost of the products so I don't pay tax on the reimbursement as if it's legitimate 1099 income? This makes it look like I was being paid more money per year than I actually was, and I am also out of pocket for the cost of the products I purchased. Were they correct to include the reimbursement as 1099 income? and if they were, how can I write of the cost of the purchase so I get a 100% tax credit?

TurboTax Home & Biz Windows

Vanessa A

Yes, they were correct to issue the 1099 reimbursement. They have to account for where their money went just like you do. You would enter this on your Schedule C as income and then enter the cost of supplies you purchased with that money as expenses.

When you enter your 1099-NEC, you will create the schedule C. As you walk through you will be able to enter additional income for the business. After you include the reimbursements, and deduct the product costs as supplies or expenses, you will effectively wash out the 1099 misc income.

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patty_morganAuthor

Thank you for responding! However, when I include the cost of the supplies in my schedule C, my Federal Tax Due only goes down by 24%, not the full amount of my product cost?

Vanessa A

That's because your tax due is a percent of your adjusted gross income. Your supplies are lowering your business income which lowers your AGI dollar for dollar but it does not lower your tax due dollar for dollar.

If you look at line 15 which is your taxable income, then look at line 16 which is your tax due for a better visual understanding of how it works.

You can preview your 1040 by clicking Tools>>Tax Tools>>View Tax Summary>>Preview My 1040

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MAK70

Yes, any reimbursement above the deductible amount is included as income.

IrisTina

In my case, it should not be included as income. The company I did contract work for agreed to pay me X amount per day, plus all expenses. Since these were travel jobs, nearly all of my expenses are food and lodging, only 50% reimbursable by the IRS. In prior years, they issued me a 1099 for only the agreed upon amount of pay. Just a week ago, after they mailed my 1099, they told me they were including the reimbursements in that total.