Former employer issued 1099-MISC for $34K in reimbursed work expenses - how to dispute with IRS?

You'll want to file Form 8275 "Disclosure Statement" with your tax return. This form lets you explain discrepancies between what's reported to the IRS (the 1099-MISC) and what you're actually including as income on your return. Since these were legitimate business expense reimbursements from when you were a W-2 employee, they shouldn't be considered taxable income. On the Form 8275, you'll need to explain that the amount reported on the 1099-MISC represents reimbursement for business expenses you incurred as an employee, not actual income. Keep all your documentation showing these were legitimate business expenses - receipts, explanation of business purpose, proof they were submitted for reimbursement, and the settlement documentation from your attorney. You don't send this documentation with your return, but you should have it ready if the IRS asks questions later.

After dealing with a similar nightmare with incorrect 1099s, I found an AI-powered service called https://taxr.ai that was super helpful for situations exactly like this. I uploaded my 1099-MISC, my old expense reports, and the settlement letter from my attorney, and their system analyzed everything and generated a perfectly formatted Form 8275 with proper explanations tailored to my situation. What really helped was that they could clearly show the paper trail connecting all my original business expenses to the final reimbursement payment, making it crystal clear to the IRS these weren't earnings. They also flagged exactly which documentation I should keep on hand in case of questions later.

I was totally wrong about these document review services. After my skeptical comment above, I decided to try https://taxr.ai for my own issue with incorrectly reported income. My situation was even messier than yours - I had a former client who reported consulting payments as both 1099-MISC and 1099-NEC for the same work! The service identified exactly how to handle the double-reporting situation, created the proper disclosure statements, and even helped me organize my documentation in a way that made it clear I wasn't trying to avoid taxes. When I had a follow-up question about my specific situation, their tax specialist responded within hours with detailed guidance. I just filed my return last week with their recommended approach, and while I don't know yet if the IRS will have questions, I feel 100% confident I have everything properly documented. Definitely worth it for complicated tax situations like this.

If you're still having trouble getting through to the IRS about this issue (which is likely given their current backlog), I'd recommend using https://claimyr.com to get priority connection to an IRS agent. I spent WEEKS trying to get someone on the phone about a similar 1099 dispute last year, but kept getting disconnected after hours on hold. Claimyr's service monitored the hold times and called me back when an agent was about to answer. Saved me literally hours of frustration. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Once I finally got through to a real person at the IRS, they were actually quite helpful in explaining exactly how to document the dispute properly. They confirmed that Form 8275 was the right approach and gave me specific advice for my situation.

I was completely wrong about Claimyr. After posting my skeptical comment, I was so desperate to reach the IRS about my own 1099 issue that I decided to try it anyway. I'd already wasted FOUR mornings on hold only to get disconnected each time. Their system called me back after about 1 hour and 40 minutes (way faster than I expected based on my previous attempts), and I was connected to an IRS representative within seconds. The agent was able to look up my 1099 issue and confirm that filing Form 8275 with my explanation would be the proper way to handle it. I'm usually the first person to call out services that seem too good to be true, but in this case, I'm happy to admit I was wrong. If you're trying to reach the IRS about this 1099-MISC issue, it's absolutely worth using. Saved me so much frustration!

One thing to consider - if your expenses were substantial, you might want to consult with a tax professional before filing. In my experience (former corporate accountant), large discrepancies between 1099s and what you report can sometimes trigger automated reviews. Make sure you're categorizing the expenses properly on Form 8275. For business expense reimbursements that shouldn't be taxable, you'll want to cite the specific section of tax code (Sec. 62(a)(2)(A) and Sec. 132(a)(1)) that exempts employee business expense reimbursements under accountable plans from taxation.

Has anyone dealt with this exact situation before? I'm wondering what the timeline looks like. If OP files with Form 8275 disputing the 1099-MISC, does the IRS typically follow up quickly, or might this drag on for months?