1099 Contractor expenses paid by employer

[jcgoldy]

What is the name of your state? Indiana

I was a 1099 contractor for 1/2 of 2004. When I incurred any expenses the employer paid them back to me. However when they did this they included it into my end of the year 1099. When I had my taxes done the tax preparer said that my meals and entertainment expenses, which were paid in full by the employer, were only eligible for a 50% tax deduction. Is this correct? If this is correct why does the employer pay me in full for the expenses put it into my total pay for my 1099 and then I can only claim 1/2 the expense on my return?

Thanks in advance for your help!

 

[cbg]

This is a tax law question, not an employment law question. It's unlikely you'll get an answer here; you might want to repost it in the Tax law section. Tell them I sent you so they don't get upset about the double post.

 

[pattytx]

If that's what your tax preparer said, it's probably true. Here are some IRS publications for the self-employed:
http://www.irs.gov/businesses/small/article/0,,id=115044,00.html

My understanding that the company may opt to include all expenses on the 1099-MISC (the instructions do not prohibit it, and in fact, require certain types of reimbursed expenses to be included). That was, in fact, income to you. The fact that you can only deduct 50% of certain expenses on your Schedule C is irrelevant. You only pay income and self-employment tax on the net earnings from your business, anyway, not necessarily the 1099 amount.