1099-MISC?

[scooter_hd]

Filed our taxes and wasn't expecting this.

2021, invested $5K into a business looking at a tiered performance-based awards ROI. 

2022, the company decided it was taking a different route and offered the capital back (NOTE REPAYMENT) if I no longer wanted to invest given the new direction of the company. I opted to get my capital back.

I've already filed my taxes this year, as being retired and not having excised anything, they were pretty basic until I received a 1099-MISC from this company on February 10th, 2023 (which is late) for my investment stating that it's income. I have the contract stating it's a "Note Repayment and Termination Agreement".

Do I need to file an amended return? Is a 1099-MISC the correct way they should have filed for a repayment of capital investment?

To me, something about this just rubs the wrong way?

Thanks in advance for any help and advice.

[AmyC · Accepted solution]

The 1099-MISC allows the company to get the income off their books and show it was paid out. You have two options:

1. Do nothing now. The IRS will receive the form and eventually send you a bill. You can then send a letter showing it was a return of capital. Not recommended.

2. Wait until the finances are settled this year with the IRS and send an amended return showing the income added and subtracted. You will enter the 1099-MISC form and then subtract the income back out like this: 

1. You would go to personal income,
2. scroll to the bottom to misc income,
3. start,
4. scroll to the bottom again,
5. other reportable income,
6. start.
7. enter negative amount and description.

Don't be too surprised if you get a letter from the IRS in a few years asking about the deduction. Keep the paper trail!

Never send originals to the IRS. They have a great upload tool now so hopefully you can just upload the letter and it will all be simple, if asked at all.

[scooter_hd]

Thank you! 

I've been calling IRS and they have no clue how to go about this because their hotlines are geared for individuals and apparently this is considered a business matter (who knew?).

The only advice we've been given is to hire a tax professional. 
Really appreciate your answering my question!