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Need a quick amswer from an accountant - tax related

  1. A few months ago I traveled out of state to provide a deposition for a former client as the request of the client's legal counsel. I did this as a matter of convenience for the lawyers as I could have demanded that they travel to my home city and made them arrange for a local atty to handle the logistics and deposition. Anyway, it took me literally three months to get reimbursed for my travel expenses, which came from the client, not their legal counsel. I found this to be rather unusual since I expected their counsel to reimburse me and then just add the cost to their bill. Anyway, today I get a 1099 form from the former client listing my reimbursement expenses as "misc income". I am pretty sure this is in error and I am concerned I will incur a tax liability as a result of this mistake. The expenses were well over $1,000 and any consequent liability would be several hundred dollars.

    My question is, am I interpreting this form correctly? What is the best way to handle this? Can this former client send in a revised form to the IRS saying they made a mistake? If I get hit with several hundred dollars, how can I make the attys take care of this for me?

    I am also considering filing a complaint with the legal counsel's state bar about this. What do you think?
  2. rock_jock,

    I'm not a CPA, but am experienced with business taxation.

    You're evidently self employed - and had income for the travel expenses - then you had a expense of the travel expenses that you can deduct as a business expense - so your "net taxable income" on this portion will be ZERO.

    Of course, the charges for your expert witness testimony will remain taxable though...

  3. I'm not self-employed and not sure how to handle this.

    Thanks for the advice, though. Its a good start.
  4. rock_jock, check your PM inbox.
  5. <~~~ not an accountant, but have experience as an expert witness. Witness fees are income and travel expenses are not.

    Around here standard travel fees are fixed by state law. IRS also has a table IIRC. I believe that if you deduct standard travel rates from what you received, you would only be liable for the difference.


    If you have receipts for transportation, hotel, meal and other travel related expenses, you can deduct that from the check and pay tax on the difference.

    Other than that, you made the money and have to pay the tax.

    Caveat: In a tax court, the above advice is worth the fee you paid for it.