Taxpayer asks:
Hello –
I work as a 1099 contractor and one of the folks I work for insists on:
1. Including reimbursable expenses in my 1099-Misc total
2. Including payment processed 1/3/2012 & paid 1/5/2012 for hours worked 12/16-12/31/2011 in my 2011 1099-Misc total
Is the above the correct way to report?
This is a Federal Tax question, as I live and work in Texas – so no state income tax.
Thank you in advance……
taxgirl says:
Okay, here’s my take –
1, It isn’t really proper to include reimbursable expenses (assuming that you were reimbursed) in your form 1099-MISC total unless specifically includable such as a travel reimbursement for which you did not account to the payer. I’m assuming that you provided a detailed list of expenses for reimbursement to the payer; failure to do this would give the payer reasonable cause to include the expenses with your compensation.
Assuming that you did everything right on your end, I happen to think that reporting reimbursable expenses on a form 1099-MISC reeks of sloppy bookkeeping. That said, normally I wouldn’t suggest insisting on an amended form 1099-MISC unless those expenses are so significant that it’s going to make your tax return look odd. But if it’s just a bit extra, it’s easy enough to net it out on your Schedule C so that it doesn’t affect your total tax due. In other words, if you actually paid the expenses, report them as business expenses since the reimbursement amount is included in the total you’re also reporting as income (clearly, however, if they were not reported as income to you and you were reimbursed, you would not include those expenses).
Do I love this plan? No. But I think it beats the alternatives which are (a) arguing with the payer when it won’t affect your bottom line and (b) reporting a different amount on your tax return than the form 1099-MISC reports. The former can result in a delay – and quite frankly, a lot of agita – and the latter can raise flags with the IRS.
2, The 2012 payments should not have been reported on your form 1099-MISC for 2011. The instructions clearly state that it is for “amounts received, paid, credited, donated, transferred, or canceled… during the calendar year.” (emphasis added) A check paid in 2012 should be reported in 2012; be careful with the date since a check that was written in 2011 but not picked up or cashed in 2012 by the recipient would still be reportable in 2011. But in this case, a check dated in 2012 should be reported in 2012. Again, sounds like awfully sloppy bookkeeping. The payer should fix that mistake: the failure to file correct information returns or furnish a correct payee statement may result in a penalty. That said, how loudly I would insist on a correction depends on the amount and how much you like working with that payer. A better approach might be to report consistently with the payer (since the timing of the tax would be affected and not the total) but gently point out the error so that it doesn’t happen in the future.
That said, if these mistakes affect your bottom line OR if there’s a significant error (an extra zero in your pay, for example), you should absolutely insist that the form be corrected.
I expect there are lots of tax pros out there who have some advice on these issues. Have at ’em!
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
Hey i was told if u work for a company and made less than 10,000 dollars and they gave you an 1099 form, you don’t have to file it on your taxes. I do work full time for a company that take out taxes, but i was interesting in doing some contract work for a company as well.