taxpayer is being paid (on a 1099) for caring for her daughter who was injured in a car accident. I know that the payments to the taxpayer are taxable and not subject to SE tax but can she deduct her expenses for mileage when she take her daughter to medical appointments? She is reimbursed for those expenses through the insurance payment but my thinking is why should she pay tax on expenses she incured even though she is reimbursed. thanks for any help
Since she is not in the business of providing care to other people she is not considered self employed as a caretaker....I learned this at a University of MIchigan tax seminar that I attended. It is an IRS ruling. Income is listed as misc. income on line 21. I was questioning on whether I could net out her expenses on that line.
Everything depends on how the income was reported on the 1099, box 3 - other income; or box 7 non-employee income.
If it is box 3, then the income can go directly to Line 21. If it is box 7, then you will Have to first use sch C, else you will get a deficiency letter.
If you have to use C, then offset it on page 2 with an entry under other expenses "offset of erroneously reported income. See Line 21 1040"
Then, enter it on line 21. As for the expenses, you could deduct them on line 21, but prepared to back them up with documentation.
I presume the payment is calculated for certain things the insurance covers. Is she only being paid for providing personal care, or is medical transportation also included?
If the coverage is not clear on that point, I would probably consider properly documented actual expenses to be allowed. As far as I know, standard mileage rate is only allowed for Schedule C business use and Schedule A medical costs, not a not-for-profit activity.
Printer-friendly format
= Quickfinder Team Member
