The very short and simple answer is that you do not have to pay taxes on the money he gave you - or, if you like, that he used to pay some of your expenses with. Certainly he couldn't give you a 1099 for that money if for no other reason than that you weren't operating a business for which he paid you money.
You should contact the IRS as soon as possible to see about getting things straightened out. I would suggest that you first go to your local IRS office and ask to speak with a representative about the issue - be prepared to spend a lot of time waiting to speak to someone, though; the government moves slowly. If you cannot get someone to straighten things out, then contact the IRS Taxpayer Advocate; they should be able to help you if no one else will.
My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not constitute an attorney/client relationship or an offer to form such a relationship. This disclaimer is intended to be fully compliant with the requirements of Treasury Department Circular 230 and the terms thereof are fully incorporated by reference. If you wish to consult with me please contact me at dana@nytaxcounsel or visit my website at www.nytaxcounsel.com
If you want to speak with a tax attorney here in Jackson, I recommend Jimmy McGee. His number is 601-965-6155 or go to mcgeetaxlaw.com.
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