1099 and expense reimbursement

Hi all, I just got form 1099- MISC from Reality Check. They included my parking expense reimbursement as part of income which made me go over the $599 maximum in income and generated the 1099 form. This seems crazy to me, as I should not have to pay taxes on money I spent on parking. Can anyone help clarify? thank you

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More About Reimbursements

Whether you made enough to generate a 1099 or not, you would still be responsible for reporting that income. If you want to keep it easy, report everything received from MSCs as income then deduct your expenses.

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This makes no sense to me as it's not to my advantage to add expenses to income and then deduct them on taxes. I would be taxed on the full amount and only credited back a small portion as far as expenses go.

Why would you be taxed on the full amount before deducting your business expenses? If you received $600 that would be your income. If you had to pay $25 in parking that would be your business expense. Income after expense becomes $575.

The 1099-misc does not necessarily need to be for wages only. It can apply to reimbursements paid out as well.

You are only responsible to pay taxes on your income, minus allowable expenses.

Which is why it's important that your record keeping also reflect any reimbursements you receive. My spreadsheet is such that I don't have to wait to receive 1099s from any MSCs. I log each assignment when I apply. It gets a color code that lets me know the status, and the summary sheet of my spreadsheet has my totals for the year so it's easy to just email it to my wonderful tax preparer and I'm done.

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Just to update everyone, I heard back from Reality Check and no 1099 MISC form will be generated afterall. They are correcting it since reimbursements should not be added to income.

I still don't get it at all. What difference does it make? I'm still assuming you report the income even if it falls below the threshold for a 1099.

Yes but reimbursements are not income and so should not be taxed.

Your expenses aren't taxed whether you received a 1099 or not, which is why it is up to you to keep the records. So again, why does it matter whether you received a 1099?

Because they were added to the 1099

It doesn't matter. On your Schedule C you will list your income and deduct your expenses. I can't believe this is the first 1099 you've gotten that doesn't just include total monies paid to you.

I'm new to this so yes, it is. And I got it corrected so don't even have to bother with expenses since they were reimbursed.

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OMG!

ibelova, if you don't understand how taxes work any better than this, do yourself a favor and get a tax preparer to do them. You haven't got a clue how self-employed taxes work.

Or are you filing as a hobbyist? If you are, and you were worried about a parking expense, I guess you're not deducting your mileage either. Which means you're paying taxes on the $575 or whatever that you probably don't have to.

Or were you not going to put your mystery shopping income on your tax return at all?

Get a tax preparer.

Time to build a bigger bridge.

Since the OP hasn't been back I hope she doesn't mind me updating the thread. We have been discussing it all because this will be her first year filing as an IC. Everything is on track.

Thanks, Lisa.

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1099 and expense reimbursement

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