1099-MISC Received from Medicare Provider for Overpayment

[tjshadb]

Help!

Our Medicare Advantage provider was audited and sent us a check for nearly $5,000 reimbursing us for our overpayment of services in 2016. They sent us a 1099-MISC with this amount on line 6. 

That can't be right, can it? TurboTax automatically kicks into "your self-employed mode" if I try inputting this 1099. And the Medicare Advantage provider has yet to respond after 5 weeks of calling 3 times a week and leaving messages.

This is them paying me back (without interest) when I overpaid for services that should have been covered. Where do I input this?

[Anonymous · Accepted solution]

this 1099 was intended for the self-employed who paid deductible medical expenses for their employees.  this is not the situation in your case.   since they won't respond here are the questions 

did you take a medical expense deduction in the year you paid them?  do not use 1099-misc in any case since line 6 must be linked to a schedule C    if you didn't get a medical expense deduction for them in the year paid 

type other income in the search box.  on line 22 list the payor -1099-misc and amount

below that put in no tax benefit  and a negative amount equal to the 1099 amount

if you took a tax deduction in the year paid compare the total amount on schedule A as filed with what it would be if you reduced your medical expenses by the amount reimbursed.

the difference is your tax benefit  - the amount that is taxable - the amount you were reimburse less the taxable amount is the non-taxable portion 

on line 22 enter the same info for the first line 

on the second line portion not taxable as a negative number.  the net  should be the taxable amount.

I warn you that since the apparently improper 1099, you might get an IRS mismatch notice

do nothing now.  if it comes you'll have to contact the IRS usually by responding in writing to the notice and explaining.  hopefully, that person will realize what is going on.

this is simply is the tax benefit rule.  if you pay an expense for which you get no tax benefit then a refund is not taxable.   if you got a tax deduction for it then it's taxable to the extent of the tax deduction. 

[tjshadb]

Thank you for explaining. I pulled our 2016 tax return and we did not itemize- even with medical expenses we didn't have the numbers.

Basically, the Advantage Plan failed to follow their maximum out-of-pocket rule. The check was the amount we paid out-of-pocket over that limit. We didn't get any tax benefit so we shouldn't have to pay taxes on a refund due to clerical error if I understand you're write up.

The Advantage Plan was purchased by another and they only have the contact listed as "1099 Specialist" which goes to a phone number with a (now) full voice mail box.

Thanks for answering my question, I literally couldn't find an answer anywhere.

I am confused by this though:

"

type other income in the search box.  on line 22 list the payor -1099-misc and amount

below that put in no tax benefit  and a negative amount equal to the 1099 amount

"

I have no idea where you are referring to. I'm looking at the Turbo Tax app and the "search" window brings up a FAQ like listing. The "search topics" button takes me to 1099-MISC. As for line 22, if you are talking about on the 1040- line 22 is 'amount you want from line 20 applied to estimated tax'.

[tjshadb]

I found line 22. It is Schedule 1 "Other Income Statement". I found it by going to the "Forms" button. I was using the lead-you-by-the-nose input system. 

Thanks for the help!