@JDWBills21 wrote:
I'm having a similar problem. I was part of a class action suit regarding billing practices of a large hotel chain. I received $1,500 in resolution of the claim. This resolution basically paid me back the amount I was overbilled. I received a 1099-NEC from the hotel chain and entered everything that was on the form into TTx and keep getting the "Missing items" warning.
Based on this thread, I entered it as 1099-Misc and my tax liability jumped almost $600 in Federal alone. Additional on the state.
I'm having difficulty understanding how a corporation used improper billing procedures, paid me back essentially the same amount I overpaid, declared it a settlement and now I have to pay $600 in taxes on it. This doesn't seem right or just.
Should I be filing this differently?
The company is required to issue a 1099 but that does not mean it is actually taxable.
If you were overcharged, and this was for personal travel, then the refund is not taxable no matter what form is used. You can either enter it as a 1099-MISC and then enter another amount of misc income as a negative number to offset the amount (they cancel each other out); or leave if off entirely and wait for the IRS to send a letter asking for an explanation.
If this was business travel and you are self-employed and took a deduction for your travel expenses, then the reimbursement is taxable income. If this was business travel and you are a regular employee and you were reimbursed tax-free for the travel, then this is taxable income to you as well (unless your employer requires you to pay them back).
