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(Seems like this topic came up earlier this year but i couldn't find the thread using the search engine. Sorry for asking any questions that might have already been answerd and thanks in advance for your indulgence.)

My husband had a job interview in 2011 and paid for some of the travel expenses (SEA-SFO) himself. He got a reimbursement check in the mail (around $1000; received in 2011) and a 1099-MISC in January of 2012. (I don't remember if he got a job offer or not but he did not go to work for the company.)

I know we can just do a Schedule C-EZ where the expenses equal the income (such as it is) so it zeroes out but i'm having trouble with the receipts my husband saved matching up to the amount on the 1099. He is not one to get mired in the details and doesn't really know why there's a discrepancy.

I toyed with the idea of adding in some mileage and other minor items we used to deduct when he had some consulting income for a few tax years about eight years ago. However, i got busy and annoyed with having to deal with this and started procrastinating and filed an extension. More procrastination this summer gets us to less than a month till the 2011 return is due and me needing to figure it out already.

It just seems wrong that we should have to file a Schedule C because of a reimbursement check. However, i am all too aware that my feelings on what's right and wrong WRT the tax code are irrelevant at this point.

So, level with me: Is Schedule C my fate? Or was the company who issued the 1099-MISC in error? If the latter, how should we go about fixing it?

THANKS!
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The company is not in error for issuing a 1099. He was paid more than $600, and he was not an employee.

Either they paid him a fixed amount or he filed an expense report. The company might have paid per diem for some expenses. If he filed an expense report does he have a copy of it?

A 1099 doesn't report details. Whether or not he kept sufficient receipts to cover the entire amount is a different problem.

If it ran $1,000, then he probably stayed in a hotel for a night. He should have receipts for air fare, food, hotel, rental car/cab/public transportation in San Francisco, transportation to/from SEA airport, and parking at SEA if he left his car at SEA airport.
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He was paid more than $600


(emphasis mine)

That's my quibble. He was reimbursed more than $600. He did no work for them. It was a job interview. No employment.
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That's my quibble. He was reimbursed more than $600. He did no work for them. It was a job interview. No employment.

It understand your quibble, but it is correct for them to issue a 1099.
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Ah HA! Some internet searching turned up several references to Rev. Rul. 62-77.

Revenue Ruling 63-77: The IRS specifies that reimbursements made to individuals by a prospective employer for expenses incurred in connection with travel for interviews are not considered wages for federal tax purposes.

Unless this was repealed for TY2011, i can contact the company and have them revoke? withdraw? unsubmit? the 1099-MISC. Any tips on how best to do that?
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Revenue Ruling 63-77: The IRS specifies that reimbursements made to individuals by a prospective employer for expenses incurred in connection with travel for interviews are not considered wages for federal tax purposes.


==============================

I think that is why the payment is on the 1099 instead of a W2.


Wages usually refers to payments subject to Social Security, Medicare, etc.
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Ah HA! Some internet searching turned up several references to Rev. Rul. 62-77.

Revenue Ruling 63-77: The IRS specifies that reimbursements made to individuals by a prospective employer for expenses incurred in connection with travel for interviews are not considered wages for federal tax purposes.


It's been my experience that when I'm tempted to say, "A-ha!" I'm about to get into trouble. Alas, this affliction seems to affect you too. First, read the entire ruling, not just a summary to which you attach the implications you desire:

http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&...

"Wages" is a term of art, and it has nothing to do with what the prospective employer did here. Wages are paid by employers to employees, and what that ruling says that under specific circumstances monies paid on behalf of prospective employees are not wages paid to an employee for employment tax purposes. Nothing the 1099 issuer has done is contrary to this ruling.

I seriously doubt that your husband had exactly $1,000 in expenses which he meticulously documented to the payor. Rather, it sounds like they figured his cost to be roughly $1,000 including a little something for his time and trouble and cut him a check in that amount. Such an arrangement with a nonemployee is correctly reported as nonemployee compensation on Form 1099-MISC. Your husband reports it on Schedule C along with the expenses he can document. The net is subject to Self-Employment Tax.

Phil
Rule Your Retirement Home Fool
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I just went back and re-read your OP and see that you said the check was "about" $1,000, not exactly $1,000 as I thought. Sorry about the confusion, but the answer doesn't change.

Phil
Rule Your Retirement Home Fool
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I seriously doubt that your husband had exactly $1,000 in expenses which he meticulously documented to the payor. Rather, it sounds like they figured his cost to be roughly $1,000 including a little something for his time and trouble and cut him a check in that amount. Such an arrangement with a nonemployee is correctly reported as nonemployee compensation on Form 1099-MISC. Your husband reports it on Schedule C along with the expenses he can document. The net is subject to Self-Employment Tax.



Thanks, Phil.

I don't have the 1099 in front of me and was the one who guesstimated its total for the purposes of asking the question here. He did fax them his receipts; they sent him a check for the exact amount. Does that information change anything in what you wrote above?
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Does that information change anything in what you wrote above?


Heh. Posted at the same time. Thanks again for your help, everyone.
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Your husband reports it on Schedule C along with the expenses he can document. The net is subject to Self-Employment Tax.

If the remaining amount is large enough to be subject to Self-Employment Tax.
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