Hello:

I am a full time employee of a company since 2006. I have done graduate degree during 2005-2007 and taken education credits using Form-8863 in all three years. As I did not receive any tuition reimbursement (or I did not know I'll get any reimbursement) during these years, I have put full expenses in Form-8863. My tuition expenses were around $6000/year.

In 2008, my employer decided to reimburse part of my previous years tuition expenses, paid me $2000 and reported it in 1099-MISC (box 7 Nonemployee compensation). However, I have also received W-2 for my regular salary from the same employer.

My questions are...
1. Is it right to issue 1099-MISC and W-2 by same employer? Or, I should request my employer to correct this and report the tuition reimbursement in w-2 box-1 preferably? (I believe this amount should be considered as income and so taxable, as I have already taken education credit in previous years).


2. If I do not need to get W-2 corrected, how should I report this income in my 2008 tax return? Using which form and/or which line on Form-1040?


Thank you in advance.

1099-misc is reported on schedule C. You may end up paying about 7.5% more in taxes; that is all.
Read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor. (http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html)