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

[Leonard]

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]

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

[PattiF]

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]

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]

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.