Wells Fargo covered an escrow shortage for $9,318 in 2017 related to a mistake they made at closing in 2016 and sent me a 1099-misc for it. Is this really taxable to me?

[JulieH1 · Accepted solution]

If Wells Fargo paid the $9318 on your behalf, then yes it is taxable income to you because it is money someone "gave" or "paid" on your behalf.

If when you say they "covered an escrow shortage"  it could be that they consider this a refund of mortgage interest paid to the lender they were required to return to you. 

If you deducted mortgage interest fees in an earlier year then the refunded amount must be reported as a recovery of a previous deduction used to reduce income.  Even though it was placed in escrow in the new mortgage it was used for your payments of insurance or property taxes or something else.

If you never deducted the fees, because you did not use them on itemized deductions, you don't have to report the refund.

If you decide you must report the income use the steps here to include the income.

For TurboTax Desktop use these steps:

1. Choose the Federal Taxes tab
2. Wages & Income
3. Scroll to Less Common Income
4. Select Reimbursed Deductions from a Prior Year
5. Select Other itemized deductions