I supposedly won a "contest" from a local tv news station for $5,000 worth of concrete. The concrete company never contacted me and the work was never performed. Emails to the tv station made promises that I would soon be contacted by the concrete company, but it never happened and I finally gave up. I received a 1099 MISC for $5,000 from the television station. Do I have to report this to the IRS?
IANAL, but I would send a physical letter to the TV station to clear this up. I would send it to the Legal Department, point out that the station had utterly failed in their due diligence in making sure the prize money was paid out. Then demand that they either (1) correct the 1099 to show nothing was paid or (2) send you a check for the $5000 they said you got but which was never in fact delivered.
I suppose you could also consider small claims to force them to pay what they said they paid you.
I don't think that will be of much use. The TV station will say they did their part, and you received a promise, worth $5,000, from the concrete company.
Others can speak, but it seems you have a bad debt, which you may or may not be able to write off. You also have to prove the debt is worthless.
I think you need to sue the concrete company. Maybe warn them ahead of time, reminding them the bad publicity will undo any of the good publicity they received by donating to the TV station, many-fold.
Maybe call the competing TV station "action team" to try to get your recovery. I bet they would love to air this item.
Then why did the 1099 come from the TV station and not the concrete company? Call the TV station, tell them you never got the "prize" and tell them to correct the 1099. They certainly didn't give you anything.
The TV station gave them the right to concrete services. They are able to sue the concrete company, so obviously they received something to sue over.
It is unclear - did YOU ever contact the concrete company?
OP Is most likely a cash basis taxpayer. She didn't get the cash (or anything else), the TV station did nothing to either get the prize to her. They have no right to send her a 1099 under the circumstances.
This may be useful to you:
Of course the TV station did something to get the prize to her. They told her "here is the certificate/letter for the prize from the concrete company". The rest is between her and the concrete company. The TV company is not going to deliver concrete.
We have no reason to belive that five grand of free concrete ever existed.
I concur with the advice to contact the TV station and tell them to correct the 1099 since they provided her with $0 of value.
If I were the TV station, the prize would be a gift certificate for $5000 worth of concrete service.
Isn't it the concrete company's responsibility to honor the certificate?
I don't disagree that contracting the TV station for correction is one avenue the OP should pursue.
However, I think the likelihood that a TV station would send out a bogus award certificate and follow it up with a bogus 1099 pales in comparison with the likelihood that a company made a donation to the TV station and then failed to live up to its commitment once that donation was awarded as a prize.
Yes, the concrete company is responsible for honoring the certificate. But if you are a cash basis taxpayer in business and you send someone an invoice, you aren't taxed on the money they owe you until they actually pay you. This woman has not yet gotten what she was promised, so she should not be taxed at this time. That's what "cash basis" means.
The payor is uniquely responsible for the accuracy of the 1099 they issued. As it is plainly erroneous, they should be asked either to destroy the form, if it hasn't yet been communicated to the IRS, or in the contrary case issue a corrected one.
I agree that is entirely likely, but I don't see why that is the problem of the recipient of the non-existent prize. The recipient has received nothing of value, has no knowledge of what agreement there might or not be between the TV station and the concrete company, and has no reason to believe they ever will receive anyting.
The "correct" answer to this is to report the $5000 as other income followed by a line showing ($5000) with an explanation - "award never delivered". The real issue for the op is that the IRS will document match the 1099-MISC with the return and will send a CP2000 notice for the difference. Depending on the other facts in the return, this could result in a significant underreporting penalty. By reporting the award and then backing it out, you have reported the putative incom
This is similar to winners of retail prizes on game shows. The prizes are always valued at full retail. If you can document that the prize was worth less, you can claim the lesser value on your tax return. (Think - "You've won an all-expenses paid trip to XXX valued at $YYY".) If you could book the same trip for less, you document the actual cost and claim that on your tax return. Again, the proper way to report it on your tax return is to list the full retail value of the prize as determined by the "giver" and then adjust to the actual FMV of the prize.
Ira Smilovitz, EA Leonia, NJ
yes, exactly correct.
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