Auto gas reimbursement on 1099Misc

[thomtax]

I think there was a recent thread on this, but cannot find using search feature.

Employee drives large amount of miles each year. The employer pays for gas and issued a 1099 Misc showing the amount reimbursed in box 7. Which of the following options would be correct, if any?

1. Enter 1099misc on line 21 of 1040 with the standard mileage expense entered on form 2106.

2. Enter the amount in box 7 of 1099 Misc as employer reimbursed expenses not reported on W2 into line 7 of Form 2106 and the standard mileage expense on form 2106. I assume that I would have to enter the 1099Misc amount as a plus on line 21 with a second minus entry showing the amount transferred to 2106 to keep the IRS from looking for a matching 1099.

3. Since it is reported in box 7 of 1099 Misc, could this be shown on Schedule C with the standard mileage deduction on schedule c. The mileage deduction will be much larger than the income so SE tax will not be an issue. This does not seem the correct way to go but want to know if there is some quirk that will allow this approach.

Thanks for all opinions.

LT

[Koss]

Incorrect Form 1099

I would take the position that the Form 1099 is simply inaccurate. I would politely ask the employer to correct the problem by issuing a corrected Form 1099 showing zero. If that fails, I would attach a statement to the return explaining the facts and circumstances.

This is simply not an appropriate use of Form 1099-MISC.

The IRS website advises employees in this situation to report the income on Line 7, then enter a negative number on Line 21 to back it out, and report all the facts and circumstances on Form 1360, Declaration of Incompetent Payroll Accountant.

However, if the employee has reasonable knowledge that the employer prepared the inaccurate Form 1099-MISC without the assistance of an accountant, then the IRS directs us to use Schedule ESS, Employer Smoking Something.

Burton

[veritas]

lol

I use Schedule EDS


Employer Drinking Something

[Kram BergGold]

The easy way

Report Reimbursement on Schedule C. Then take an equal deduction on Schedule C. Then report the reimbursement on 2106 along with the expenses. Then ask employer to put the reimbursement in the W-2 next year or at least in box 3 of a 1099 Form.

[OldJack]

2. Enter the amount in box 7 of 1099 Misc as employer reimbursed expenses not reported on W2 into line 7 of Form 2106 and the standard mileage expense on form 2106. I assume that I would have to enter the 1099Misc amount as a plus on line 21 with a second minus entry showing the amount transferred to 2106 to keep the IRS from looking for a matching 1099.

Obviously the employee has not accounted for the gas to his employer so the employer reported the fringe benefit on form 1099Misc. It would probably have been more appropriate to have reported it on form W2.

However, in either case the employee should report as in your option 2: The employee now has to file form 2106 reporting the income and taking his deduction.

[thomtax]

Obviously the employee has not accounted for the gas to his employer so the employer reported the fringe benefit on form 1099Misc.

Actually the gas was charged on the employer's credit card and the bill was paid by the employer. Client is an investigator for one of the big advertising lawyers for personal injury claims, etc. When the client questioned the 1099, they sent him letter and attached copies of two pages from the JKLasser book showing the rules of an "accountable plan".

Thanks for all the advice from everyone. Maybe I can hire the lawyer to sue himself for not handling things the way my client wants.:-)

LY

[OldJack]

Actually the gas was charged on the employer's credit card and the bill was paid by the employer.

Employer is correct. Submitting or charging on a credit card does not meet the requirements to account for "who, what, where, when, and why".

[thomtax]

Old Jack

I guess that I did not explain well. The employer is saying that it is an accountable plan. I would have thought that box 3 would have been a better choice on the 1099 than was box 7.

I appreciate your comments.

LT

[outwest]

Sigh..

the point is that if the employer is correct, (that this is a accountable plan) then NO 1099 should be issued.

If it is an accountable plan, NO reporting is required at all.

The fact that the employer sent a 1099 indicates it is NOT an accountable plan.

Now, let's point out that ANY box on the 1099 is wrong because the reporting should have been through the w2 rather than a 1099

[veritas]

So that brings us back

to Schedule ESS or EDS. Take your pick.

[OldJack]

I guess that I did not explain well. The employer is saying that it is an accountable plan.

Well... as I read the situation, it was that the employer simply gave the employee a credit card to charge gas at the pump probably with a statement that he has to account for the gas. I expect that charge was the total "accounting" that was done by the employee and therefore no justification as to how much of the gas was used for business or personal. That is not an accountable plan even if there is a written document saying it is because the employee has not accounted for anything but the fact that he got gas on the employers credit card.

Say it was not gas, rather it was cash money out of the petty cash drawer. The petty cash fund procedure is to replace the cash with proof of business expense and with receipts for the same. If the employee taking the money does not provide documentation of an expense it is income to the employee.