Q. Do I need to claim this as income if it is a refund of my money spent on the flooring?
A. No. As, you said this is only a refund or discount on a purchase and not income to you.
That said, the 1099 (I assume a 1099-Misc) is problematic. The IRS gets a copy and exacts to see that $8000 on your tax return. I'm of the opinion, it's an erroneous document.
If you received an erroneous 1099-Misc, you have several choices:
- Ideally, you get a corrected 1099-misc from the payer
- Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the old IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
- Report the income as misc line 8z, Schedule 1 income (enter in TurboTax at the 1099-NEC screen and identify it as sporadic income ["did not involve intent to earn money"]). Then enter a line 8z deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front. Briefly explain at description. Call it something like "erroneous 1099 received"
- Do nothing and hope you can explain it away when & if the IRS contacts you
Most answers to this question, in this forum (and it's frequent question) recommend #3, if #1 fails (and it usually will).
