How are mileage deductions handled on 1099-MISC forms?

Question

I was paid mileage by a company I did some contractual work for in 2006. This mileage was paid to me at the IRS reimbursement rate by the contractor for all of my mileage. My total income including the amount of mileage I was paid for was all included in the 7. Nonemployment compensation box of my 1099-MISC form and I want to verify that this is correct. Should paid mileage be taxed the same as income?

Finally, for future reference is it more beneficial for me to simply take a deduction from the IRS instead of being paid by the contractor for mileage?

Thanks in advance.

Answer 1

If you are an independent contractor then all the compensation that the company paid you for is income to you. You should report the income paid to you on the 1099-Misc on a Schedule C, and then you would also be able to claim the mileage that you were paid for as an expense under auto/truck expenses. The mileage rate for 2006 was .445 per mile. You would be only able to claim the actual business miles that you drove for the contractual work. And as for it being more beneficial for you to simply take a deduction from the IRS instead of being paid by the contractor for mileage, unless the income tax rate ever goes up to 100% tax you're better off being paid by the contractor.

Answer 2

1099-misc means you yourself are a company which provided services to the company that issued you 1099-misc. You are not an employee. 1099-misc (nonemployee compensation) income: You are self employed or independent contractor. You must file your tax return if your self employed income is $400 or more. You will report your income and business related expenses on schedule C or C-EZ (Form 1040). Then you put net income (or loss) on line 12 of Form 1040. This income is subject to SE tax at 15.3% (this is shown on line 57 of Form 1040). For this you will use schedule SE (Form 1040). Even though schedule C treats you as a self employed, which may not be correct for you, this is how you report this income.

Answer 3

For the last part of your question, you are better off with the reimbursement. Lets assume your mileage reimbursement was $100. If you are in the 28% bracket (taxable income up to $154,800 for a single), your deduction is worth $28. The reimbursement, even if taxed is worth $72. Which sounds better to you?

Someone will probably correct me if I'm wrong, but it the mileage reimbursement is reported as income, I believe you can still claim the deduction.