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Tax Law (Questions About Taxes)/Form 1099-MISC, Box 3 (Other Income)

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Question
I am a veterinarian and receive a W-2 from my veterinary employer.

From a pharmaceutical company, I received a 1099-MISC with an amount ($816) in box 3 (Other Income). I am not employed by the pharmaceutical company however my employer does sell its products. The $816 I received from the pharmaceutical company was in the form of a prepaid visa card. For each point that I earned, $1 was loaded onto the card. Points were earned throughout 2012.

The rewards card did have a stipulation that any money accrued must be used to reward/recognize coworkers. Recognizing the veterinary technicians on technician appreciation day with gift cards is one example of how I used this money. I spent only a fraction of the $816 that accumulated. The residual amount is available for use in 2013.   

Should my 1099-MISC box 3 amount be reported/taxed at the federal level and if so what are my options to report it in a way that recognizes the fact that it had to be used for business-related expenses?

Answer
Nicole,

Thanks for your question.

I would report it on Schedule C showing the $816 as income and taking a deduction for the amounts that you gave to the techs.

This will create a problem since you did not use all of it, there will be tax to pay on the "profit."  If the remaining amount is under $400 you will pay only income tax and not self-employment tax on the amount.  Next year, you can show a loss for the amounts paid the techs.  But if you have to pay SE tax, that cannot be recouped.

Hope this helps.  

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

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I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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