Andrew:

My questions relate to expense reimbursement for an ONC Fellow at Stanford. My daughter is an MD and three year clinical researcher beginning to be published and recognized in her specialty.

She is asked to and volunteers to present at ONC professional meetings, symposia, etc., and because she is beginning to be recognized, in 2008 she received expense reimbursements or stipends from three presentations to offset her expenses of travel, room and subsistence. The reimbursements do not offset the total costs incurred. As you are aware those cumulative costs would be deductible as a miscellaneous itemized deduction but for the 2% of AGI floor. The sponsoring organizations have issued Form's 1099-MISC in those cases where the expense reimbursment has exceeded $600 in 2008.

In 2009, she has already received expense reimbursements from two presentations and is beginning to receive free rooom and subsistence for attendance at "Investigators Conferences" held prior to professional meetings. "Investigators Conferences" are usually held before a professional meeting and reseachers who conduct clinical trials are invited for their input and exchange of thought. Usually, the "invited" investigators expenses are paid by a sponsoring drug company or the professional meeting group. Presumably, Forms 1099 will be issued in connection with expenses paid at these meetings if they exceed $600 in 2009.

When I put the Form's 1099-MISC income into my tax software it treats the income as miscellaneous income subject to employment taxes. My position is that the money received is an expense reimbursement and should be used to offset expenses incurred to attend these meetings whether or not the total expense ever gets large enough to be deducted on Schedule A as a miscellaneous itemized deduction.

I would appreciate your comment on treatment of these expense reimbursements, whether or not the total of expenses incurred during the year eventually results in net expenses deductible as miscellaneous itemized deductions.

While, I will certainly be able to explain the disposition of the income reported, I am concerned that it will raise a question with IRS.

Thank you for your help.

Tom

Zip Code: 18103

Here's what we do in my office:

First, we report all of the 1099-Misc income on line 1 of the Schedule C, since the IRS will want to see all the income reported on 1099-Misc's reported on your daughter's tax return.

We then claim all the reimbursed expenses that were included on the 1099s as an expense on the Schedule C. We'll either put those expenses on the Travel line, or we'll group them together on page 2 of the Schedule C as "Reimbursed Expenses Included on the Form 1099". Your daughter can then claim the remaining unreimbursed expenses on her 2106.

The key thing is that your daughter does not pay income taxes and self-employment taxes on income she doesn't earn.

Tom, I hope this answers your question.

Zip Code: 01801