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Level 2
posted Feb 24, 2022 11:20:04 AM

1099-MISC from SCRA Refund

I received a 1099-MISC from my bank. They conducted an audit of my accounts under the THE SERVICEMEMBERS CIVIL RELIEF ACT (SCRA). Since it was reported to the IRS as "other income" I am forced to claim it as income on my taxes. I do not understand WHY? This is not "free money" or "additional income" given to me by the bank. This money is a REFUND of fees, interest and other charges the bank charged me and then REFUNDED me under the SCRA. In essence they are giving me money I paid them back to me. It is not NEW income or ADDITIONAL income, it is income that is already part of the income reported as wages in my taxes. If I add this 1099-MISC money into my income then I am being taxed twice on the same money. What documentation do I need to show this so I can not report this money and prevent an audit from the IRS.

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1 Replies
Expert Alumni
Feb 24, 2022 11:48:30 AM

Yes, you do have to report the amount as "Other income", but because of the nature of this amount, it should not be taxed.

 

I am assuming this is all related to personal banking and not to a small business account. If that is the case, you can enter a balancing transaction to offset the amount.

 

Here is how to enter your 1099-MISC box 3 amount:

  1. Select Federal on the left side menu.
  2. Select Income and Expenses toward upper left.
  3. Expand/ scroll down the list and find the section called, Less Common Income.
  4. Scroll all the way down and select Miscellaneous Income, 1099-A, 1099-C.
  5. Select Other reportable income.
  6. Answer the first question Yes.
  7. Enter SCRA refund as the description and amount on this page, click Continue. 
  8. Click Add another income item.
  9. Enter SCRA refund as the description and the same amount as a negative number on this page, click Continue