I participated in a Section 125/Cafeteria Plan when working for my former employer. I incurred continuous daycare expenses and received reimbursement through the end of my employment. I received a 1099 Miscellaneous income about 2 days ago. When asked, my former employer said they couldn't find the receipts for a partial amount of the reimbursments and issued the 1099 as income. I have a copy of the daycare costs incurred and paid during that time period. They said it is too late to turn in receipts. I already submitted this information, received payment and it is not my fault if they have misplaced the information -- I offered to submit my copy but they said it is too late. What is your advice?

Thank you.

If you submitted the paperwork and they lost it, you need to CONTEST the validity of the Form 1099-MISC. Otherwise, the IRS will expect you to report that income on Schedule C and pay income and self-employment taxes on it.

Getting the IRS involved is a last resort, because it will not make you very popular with your employer, but that is the only real solution if the employer will not own up to their mistake and correct the problem.