Reimbursement of Medical Travel

[Patrick Michael]

Client has a special needs child and has to travel from NY to Minnesota every year to see a specialist.  She submits her travel bills to a charity which then reimburses he for the travel expenses.  All is good until  the charity issues her a 1099 Misc with the reimbursement amount in box 7.  The charity insists they have to issue the 1099 and will not issue a corrected 1099.  She does not have enough medical expenses to clear the 7.5% hurdle for schedule A. I don't believe this should be taxable and not sure how to handle this.    Leave it off and wait for the CP2000 notice, put it on line 21 with an offset to zero it out, or a schedule c with an offsetting expense to zero it out?

Any thoughts?

 

 

[Jack from Ohio]

Schedule C-EZ and net it out with misc expenses.

[rfassett]

I don't hate Jack's approach, but I think I would put the expenses in the medical section of Schedule A with a line item noted "reimbursement of medical expenses from xyz charity (see line 21 of form 1040)".  I would then list the 1099M amount on line 21 of Form 1040 and then on a separate line zero out the amount with a notation that the amount has been moved to the medical section of Schedule A.  Be sure to force the printing and efiling of Schedule A.  The only reason I prefer my approach over Jack's is the Schedule C approach implies that your client is in some sort of business.  Not so for this money - or at least not according to the facts stated. 

[jklcpa]

I like rfassett's approach better than Jack's too, but both would work.  The only other suggestion is to ask the charity to consider using box 3 on the 1099-misc if they insist on issuing the form.

[Medlin Software, Dennis]

Catch-22.  Assuming the amount should not be on a 1099, the recipient has to deal with the mess, as it is unlikely they are going to educate the charity. Similar to an "employee" who receives their pay, with nothing withheld, because their "employer" thinks they can pull off the IC scam.

My wife gets a W2 each year for payments which, by statue, are not wages or taxable.  The agency knows, but has no incentive (or reason) to find out if any or all is exempt.  Have not yet been audited, but I know some who have.  I am not happy with "ignoring" the W2...

[Patrick Michael]

Thanks everyone.