I was working with an employer on H1b as full time. Employer also paid me re-imbursements (substantial amount) for my expenses during the year as expenses.
I had got W-2 from my employer and now the employer has sent me 1099-Misc for the expenses re-imbursements. Is it legal? Why he did not tell me and deduct my taxes earlier. I left that employer and I think, thats why he sent me 1099.
What can I do? I was not working as independent contractor, but as full time employee. Don't I have right to get W-2.

AtlantaTaxExpert

Defleopard22:

Since you have left the employer, there is little you can do. However, reimbursement of these expenses and reporting the reimbursements under Form 1099-MISC is perfectly legal. You would report the income on Line #21 of Form 1040 as "Other Income". State that this money was "Reimbursement for expenses".

Have you filed your tax return yet for 2005? If not, you can claim the expenses as employee business expenses using Form 2016. Unfortunately, if you do not itemize, this option may not produce enough expenses to exceed your standard deduction. Further, the expenses that match 2% of your Adjusted Gross Income cannot be deducted.

If you have already filed your return and then determined that you could have deducted these expenses, you will have to file an amended return.

defleopard22

Thanks Atlanta for your reply. No, I have not filed my tax return. But, this 1099 will take my tax liability thorugh the roof. Not to mention, the penalties I will have to pay.
And, since I have a house payments, I have to itemize anyways. So, thats one good thing.

What kind of expenses can I show on 2016. These were per-diem re-imbursements. I never submitted any expense report to my employer.

AtlantaTaxExpert

At the minimum, you can claim the per-diem you were paid. That covers food, lodging and incidental expenses.

You can also claim any mileage you accrued for work (but NOT commuting expenses to and from work; commuting is never deductible).

defleopard22

Thanks Atlanta. I have further question in this regard. I read everywhere, that,

W-2s are for employees, and 1099's are for non-employees. It is not correct to issue a 1099 to an employee, except for work they might perform after they cease to be employees.

Is it true? Is it wrong for them to issue 1099 for some wages for the time, when I their employee?

AtlantaTaxExpert

That is a misconception.

Form 1099-MISC is a multi-functional form. It is used to report rent and, yes, reimbursements to employees.

defleopard22

Thanks Atlanta for your prompt reply. This is really great site for all the help we need.

AtlantaTaxExpert

Glad to help!