We received a bill for 2003 tax year because my husband's company filed a 1099, which we never received. He works on a commission, and his commissions are reported on the W2. The 1099 reflects reimbursements such as gas or office purchases. His employer would often "lump" everything together and cut him a check...

Now the IRS thinks that we recieved income that we didn't pay taxes on. We got a print out from the company account that shows all the check numbers and amounts, but who do we go about determining what was taxable and what wasn't? And are the check numbers going to help us?

thanks!

AtlantaTaxExpert

Michelle1026:

How much money are we talking about on the Form 1099-MISC?

If the payments are in fact reimbursements for expenses, then your husband's company was not correct in reporting those payments under Form 1099-MISC. The best course of action is to get the company to submit the necessary paperwork to the IRS to rescind the Form 1099-MISC.

If the company will not cooperate, the next step would be to claim the expenses as deductions. Ask the company to provide you a copy of the Form 1099-MISC. If they will not, then ask the IRS to provide you a copy of the Form 1099-MISC, either by photocopy or with a printout.

What block on the Form 1099-MISC has the income, Block 3 (Other Income) or Block 7 (Nonemployee Compensation)?

If it is Block 3, then you claim the income on the front side of Form 1040. You have to use Employee Business Expenses under Itemized Deductions to offset the income with the expenses. If you do not itemize, you are out of luck. If you do itemize, then you still have to accrue enough Employee Business Expenses and other Miscellaneous Expenses to exceed 2% of your Adjusted Gross Income. Look under Chapter 30 of IRS Pub 17 (you can download it from www.irs.gov) for the details on what miscellaneous deductions you can claim.

If it's Block 7, then you can claim the Form 1099-MISC income on Schedule C/C-EZ and offset it with your documented expenses. However, remember that the burden of proof for these expenses rest with you, so you had better be ready to show cancelled checks, store receipts or credit card receipts for your claimed expenses.