@sears wrote:
I just found a letter in the back of the envelope that contained the 1098. I apologize
It says the following:
A credit in the amount of $23.28 was applied to your account to reimburse you for the overpaid interest.
a portion of this refund in the amount of .86 is interest paid as a benefit to you. This refund may be reported on an IRS 1099-INT Form in January 2021 for Tax Year 2020.
Additionally, $22.42 of this refund may be reported in Box 4 of your 1098 Form in January 2021 for Tax Year 2020
The $22.42 is a refund of overpaid interest. It is taxable if you got a tax benefit from it in the past. For example, if you regularly deduct your mortgage interest, then this $22 was probably a beneficial deduction in 2019 or an earlier year. If it was a beneficial deduction before, the refund is taxable to you now. Enter it as a taxable recovery (refund of a previous deduction) in the Other Income section. The interest on the $22 (amounting to a few cents) is paid to you or credited to your account in 2021, so it will be taxable on your 2021 return.
If you did not receive a benefit from deducting mortgage interest in the past, then it is not a taxable recovery now.
