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Do I need to report a Bank apology credit 1099-Misc on my 2018 income tax return?

Forum|Forum|7 years ago
June 6, 2019
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My home mortgage bank transferred my mortgage to another bank in 2017. I was on a cash back program with the first bank so when the mortgage was transferred, I received a lump sump of $2892.44; description: "MARKETING AND MORTGAGE PROMOTIONS SWEEPSTAKES, PRICES, BOOKS OR APOLOGY CREDITS". I received a 1099-Misc for this lump sump.

Do I need to report this 1099-Misc on my 2018 income tax return? If it wasn't for the mortgage transfer the cash back would have been gone toward my mortgage principle every month.

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Best answer by Opus 17

So, #1. The original program was essentially a rebate of your mortgage interest. If you were deducting mortgage interest as an itemized deduction, you should have been reducing the amount of your deduction by the amount of the rebate for every year that you receive the rebate. If not, you can either go back and amend your tax returns to reduce your deduction and pay the higher income tax amount, or you can hope that the IRS doesn't audit you.

#2. The check from the new bank is also essentially an interest rebate. If you never itemized your deductions to deduct mortgage interest, then the check is not taxable. However, if you've previously itemized your mortgage interest deduction, then this money is now taxable income because it is a "taxable recovery" of a previous deduction.

Report it as 1099 MISC income. Be sure to answer the questions about work with no, you did not intend to earn a profit, no, this is not similar to your regular job, etc. The income will be added to line 21 has "other income".

Z

Zbucklyo

Employee

What box is the amount reported in?

W

waterdrinkerAuthor

3. Other Income

O

Opus 17

Employee

I think we need more details about the cashback program that you were originally on.

W

waterdrinkerAuthor

Every month they give me 1% of the monthly mortgage payment back with 2 options: cash back or put it towards the principle. I chose put it towards the principle.

O

Opus 17Answer

Employee

So, #1. The original program was essentially a rebate of your mortgage interest. If you were deducting mortgage interest as an itemized deduction, you should have been reducing the amount of your deduction by the amount of the rebate for every year that you receive the rebate. If not, you can either go back and amend your tax returns to reduce your deduction and pay the higher income tax amount, or you can hope that the IRS doesn't audit you.

#2. The check from the new bank is also essentially an interest rebate. If you never itemized your deductions to deduct mortgage interest, then the check is not taxable. However, if you've previously itemized your mortgage interest deduction, then this money is now taxable income because it is a "taxable recovery" of a previous deduction.

Report it as 1099 MISC income. Be sure to answer the questions about work with no, you did not intend to earn a profit, no, this is not similar to your regular job, etc. The income will be added to line 21 has "other income".