We've received a small amount of restitution (Ponzi Scheme) from a prisoner's check but we haven't received a 1099-G. Do we need to report it and if so, how?

[dunlapmichaell]

We already gathered some money back through "Safe Harbor" but it was a small amount.  My question now is concerning the restitution the criminal (our previous CPA) is paying us out of her prison check.

[ToddL · Accepted solution]

Court-ordered restitution payments are after-tax dollars being returned to you and are not taxable. Restitution is only to offset your actual loss, it should not be considered income or profit.

Since this payment didn't come from government funds, you won't likely get a Form 1099-G. The government facilitated the payment, it didn't make the payment.

[pksmith60]

I have a similar situation; however, I have been writing off the capital loss (limited to $3000 per year).  Do I need to add back the restitution checks I received?  If so, is it recorded as normal miscellaneous income or is it recorded somewhere on Schedule D?