What to do with a dubious 1099-INT

"Tom" wrote

Neither I nor you know what their intent is. The 1099 is supposed to represent interest you were paid during this year. Correcting a prior year

Unless the dollars are insignificant, just how does one 'forget' receiving income.

Regardless of it's "realness", you need to address it on your return. Do not just ignor it, because the IRS thinks it's real and they will expect you to address it on this year's return in some manner.

You need to check your records and if you believe it's not valid income, then handle it accordingly. You could, report the income and subtract it back off with your explanation that it was never received directly or on your behalf. This will probably not be an e-file return with the explanation attached.

Yes, they have to tell you what the heck they are doing. And if not you, then they'll end up telling the IRS.

Me? I'd tell the IRS the 1099 is not valid, that you didn't receive the income, that you can't get the issuer to explain the source/reason for the

Eventually, quicker if the dollars are significant, the IRS will get around to asking them to validate the 1099 data.

In the mean time, there's no way to guess what happened. You are in the best position to know what loans you had made to the entity, etc. If you don't know what it's about, how can anyone else.

I had money in an escrow account, which they returned to me in 1/08. At the time I asked my former accountant about it and he said it was not taxable as it was just my money being returned.

So, you are sugesting I make two entries; one for the interest and a second entry with a negative number so they sum to zero? How exactly do I explain to the IRS what I have done? Write "see note 1" and attach a sheet with an explanation?

Your accountant could be right. In some circumstances if a fixed-income investment has gone into default, any future payments are treated by the recipient as return of capital. See Pub 550. You would report this on Schedule D.

Steve

Paul Thomas, CPA wrote: (snipped....

Oh, I'm SO tempted to post an answer to this one. Does "Dashcel" or Geithner ring a bell?

nevermind. I just better not respond after all.

ChEAr$, Harlan Lunsford, EA n LA

No, but Quasimodo does.

Yes, you should not have.

BUT, I miss the old days where failing to withhold trust funds on your nanny or your housekeeper was enough to get your name taken off the list.

Dick

"Harlan Lunsford" wrote

Yup. They're the people who are going to set a shining example of citizenship, service and sacrifice to this country as they lead us to change from the prior dastardly presidency into the new and improved dastardly presidency.

This crap just goes to show that all Congress people should be audited every year.

Was the 1099 for the full amount you received? In that case, it's quite wrong. Or was it for the amount of the payment that represents interest (that is, the excess over the amount you originally deposited in escrow)?

Seth

Hey: They wanted change.

Going from bad to worse is still a change!

------ END political rant.

They are.

Happy now?

Seth

Since when?

ChEAr$, Harlan Lunsford, EA n LA

Since the IRS set up a special section to deal with them, many years ago.

Seth

Okay, let me get this straight. Are you saying that ALL congresspeople, reps and senators, get audited each and every year?

OR; are you referring to a special "tax force" set up to assist them with actual preparation of their returns? There's a difference.

ChEAr$, Harlan

That's the version I heard. The IRS started doing it many years ago in order to avoid accusations of attempting to use political pressure.

I doubt any of them do their own returns. (Now someone is going to find one who does.)

Seth

I've not heard that. But I did read somewhere that a US Supreme Court Justice (someone else will have to remember who) was not pleased with his audit by the IRS and bent as far as he could against them in his judicial opinions afterthat. Now if that is true, just think about what happens when Congress gets audited.

But it does need to be done.

It's possible, but who wants the IRS to prepare their return? OTOH if you turn over complete and accurate financial data to the IRS and they prepare your return, have they not effectively audited you and closed that year?

Dick

I was once consulted by someone who, the first time he filed a tax return, didn't know what to do so he checked the box to have the IRS calculate the tax. All the information he gave was accurate and complete.

A while later the IRS contacted him and told him the calculation of tax had been incorrect, and he owed more tax. Plus interest and penalties.

I've since heard similar stories in occasion.

Stu

That's beautiful! Did you get the penalties abated?

Dick

Unfortunately no. He told me that years after it happened, so I had no opportunity to help.

Stu

I didn't say the audits are very _hard_. I suspect that they aren't; they exist so that the _threat_ of audits doesn't exist.

I meant they probably all have accountants to do that sort of thing.

Seth