We received a check from Wells Fargo Remediation for refund of home warranty service. Does this need to be reported as income on our taxes?

[dsehlers]

Do refunds for home warranty service count as income on taxes?

[DaveF1006]

No. refunds for home warranty services do not count as income.  You are receiving money back for money that you have already paid for a service or premium that was never performed. 

[reggie7_4]

Thank you for your clear reply!  I could not find this information anywhere else. I needed this in order to complete my Income section of my TurboTax return.

[alamberson1]

We received a check from wells fargo remediation for the big lawsuit they had where they had things in our name and took money from our account that we never signed up for. They send me a 1099INT and a 1099MISC. Do I have to report this when they were giving us this due to their error and fraud? Thanks

[alamberson1]

We received a check from wells fargo remediation for the big lawsuit they had where they had things in our name and took money from our account that we never signed up for. They send me a 1099INT and a 1099MISC. Do I have to report this when they were giving us this due to their error and fraud? Thanks

[KrisD15]

Form 1099-INT should be reporting the interest on the money they took. That would need to be entered and claimed.

• Wages & Income 
• Interest and Dividends
• Interest on 1099-INT    START 

As far as the 1099-MISC that you say is reporting the return of your personal funds, that gets tricky. 

The loss of that money could not have been claimed by you since the law on claiming personal losses changed in 2018. Personal loss is not claimed for tax years 2028 through 2025.

The 1099-MISC sounds like a "Reimbursement" and the only reimbursements the IRS addresses are "Employee Reimbursements", "Medical" and "Insurance".

How to handle the 1099-MISC is somewhat up to you at this point. 

First, the most conservative way would be to enter the 1099-MISC as Other Income, subject to income tax, not Self-Employment tax.

Second, you can just not enter the 1099-MISC and have the documentation to show it was simply a return of your funds. The IRS very well may inquire and you would need to make your case. This could also flag your return if the IRS system is looking for you to match that 1099-MISC

The third way would be to enter the 1099-MISC and then make an adjusting entry to zero that income out. You could include a description something like "Wells Fargo's return of funds" to clue the IRS as to the reason for that entry. This way the 1099-MISC is matched in the system, but you're not taxed on the income. 

To go this route:

• Enter the 1099-MISC under
• Wages & Income
• 1099-MISC and Other Common Income
• Income from Form 1099-MISC    START
•  
• Once that entry is done, go to:
• Wages & Income
• Less Common Income
• Miscellaneous Income, 1099-A, 1099-C    
• Other reportable income    START

Type "  "Wells Fargo's return of funds" or something similar for the Description 

Enter that amount AS A NEGATIVE NUMBER  (put a minus sign in front (-) 

The reversing entry will post on Schedule 1 line 24z

I'm surprised Wells Fargo issued Form 1099-MISC rather than just a check, but I believe those are your three options. 

There are no links for me to provide since this is a specific issue not addresses specifically in any IRS publications that I can find. 

[alamberson1]

Thank you. Yes, I was surprised we got this when this was their deal and they were told to compensate us for the wrong that we did. They reached out to me. I didn't reach out to them. I just called them back and they told me what had happened.  I will do the third option to try to avoid IRS flag.  I did the first option already and my refund went WAY down and that's not fair when I didn't ask for any of this to happen to me. This was their error/fault/fraud. Thanks

[alamberson1]

The 1099INT is also regarding this. There is no other interest income I have there. Banked there for years and never had this.

[alamberson1]

They did withhold federal tax on the 1099INT so that didn't hurt as much. State of Iowa has an exemption for victim compensation awards adjustment to income, so I did include this there to exclude it from being taxed. Hope that was correct but as I stated above, I don't think it should be taxed by federal since it was wells fargo's deal and not mine.

[DaveF1006]

To clarify, was this reported on a 1099 INT? Reason I ask, 1099 INT reports bank interest payments strictly and not remediation payments or compensation awards. Those are usually reported on a 1099 MISC.