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spinny
New Member

How do you report a capital credit payment received from a electric coop?

 
5 Replies
Leonard
Intuit Alumni

How do you report a capital credit payment received from a electric coop?

You do not have to report capital credit payments received from an electric coop.  As you purchase electricity from the cooperative, you build equity in the coop

Capital credits are a return of money paid for electricity in a previous year and are generally not taxable income for residential consumers.

jryan32
Returning Member

How do you report a capital credit payment received from a electric coop?

What if you received a 1099-DIV (for one check) and a 1099-MISC (for second check)?

pattif12
Expert Alumni

How do you report a capital credit payment received from a electric coop?

Since the income was reported to you on the 1099-DIV and 1099-MISC, you will need to enter these in your tax return.

 

Go to the Investment section under income. Find 1099-DIV and start, follow the prompts and enter the information on the form.

 

In order to enter the 1099-MISC as income and not self-employment income, follow these steps:

 

You can enter the 1099-MISC in TurboTax as "Other Common Income," which is reported on line 8 of 1040 Schedule 1 and will not generate Schedule C or SE tax.  Please use the following steps:

  1. Click on Federal > Wages & Income.
  2. Scroll down to the Other Common Income section. 
  3. Click on the Start/Revisit box next Form 1099-MISC. 
  4. On the screen Did you get a 1099-MISC?  click on the Yes button.
  5. On the next screen, Let's get the info from your 1099-MISC, enter the information from the 1099-MISC.
     
  6. On the following screens, answer the following questions:
    • Did it involve work that's like your main job? No.
    • You got it in 2020
    • No, it didn't involve an intent to earn money

 7.  Continue through the rest of the interview screens. The income will appear as Other Income.

jryan32
Returning Member

How do you report a capital credit payment received from a electric coop?

I'm still confused.

I understand where to enter the 1099-MISC, but don't understand why I have to pay tax on it...because like you said a capital credit from a telephone coop is "not taxable income for residential consumers"...and I'm a residential consumer.

They even sent a slip of paper saying they're required to send the 1099-MISC out, but that we need to consult our tax preparer as to how to handle it.

Still confused...!?

ToddL99
Employee Tax Expert

How do you report a capital credit payment received from a electric coop?

The capital credit payment you received is only taxable if you claimed a tax deduction for the electric costs that led to the payment. This occurs when you use the electricity for business purposes and deduct the cost as a business expense 

 

The electric coop does not know if you are using (and deducting) the electricity for business purposes, so they issue a 1099-MISC with all capital credit refunds.

 

As previously stated, "capital credits are a refund of prior years’ electric costs and not taxable unless the electric bills were deducted for tax purposes. "

 

If you did not deduct the electric costs for business purposes, enter the 1099-MISC and an offsetting expense to make sure it is not taxed:
 

To report the income:  

 
If the 1099-MISC reports  income that is not related to your main job or self-employment, enter the information as follows in the 1099-MISC interview:  

  • Type "1099 misc" in the search window 

  • Click on "jump to 1099 misc" 

  • Enter the information from your Form 1099-MISC, and click on Continue 

  • Enter a description and click on Continue 

  • On the screen with "Does one of these uncommon situations apply?", indicate "None of these apply" 

  • Answer "No..." to "Did the [Capital Credit Refund] involve work that's like your main job?" 

  • Answer "I got it in 2020" when asked "How often did you get income for [Description]?" 

  • Answer "No, it didn't involve an intent to earn money." 

The amount will be reported on line 8 of Schedule 1 (Form 1040). 

 

To enter the adjustment:   

  • Type "other reportable income" in the search window (or in the Search Topic window for desktop versions) 

  • Click on "jump to other reportable income  (or "other reportable income" in the Search Topic results) 

  • Answer "No" to "Did you receive any other wages?" 

  • Select "Other reportable income" from the Miscellaneous income list 

  • Select Add another Income item  on the Other Miscellaneous Income Summary screen 

  • Enter a Description (Capital Credit Refund) and the amount as a negative number,  then click on Continue 

A corresponding negative amount will be entered, and line 8 of Schedule 1,  will be zero. 

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