Where on a 2017 tax year 1040 form would you include a 1099-Misc payment received for a surrender of

dbush04505#1

Where on a 2017 tax year 1040 form would you include a 1099-Misc payment received for a surrender of possession agreement payment. I used line 21 and received a letter from the IRS suggesting this was improper. Note I was not a contractor or self employed to the mortgage company that agreed to this payment as “keys for cash”.

MatthewD

Hi Dbush,

CoryF has provided you some great information. I want to add to what he has told you with some additional research I found on this topic.

The IRS provided some guidance on this topic back in March 2011. See this IRS Notification: Volunteer Tax Alert 2011- 08 March 4, 2011 Cash for Keys Program. To summarize, financial institutions were paying homeowners or tenants cash to move out a home that was foreclosed on. The concern was that the financial institutes reported the amount in box 7 of the 1099-MISC as Non-employee Compensation, which was incorrect. The amount should have been reported in Box 3 as Other Income.

On your 2017 return, you reported it correctly on Line 21 of the 2017 Form 1040. However, the IRS did not get a corrected 1099-MISC. Hence the IRS notification you got.

Is that what happened to you? Was that amount in box 7 as non-employee compensation? What I recommend you do write back to the IRS and contest their assessment. Explain that the financial institution never provided a corrected 1099-MISC and the payment was for a "Cash for Keys" program. If you can mail them a copy of the 1099-MISC, that will help.

Here is the link again for that IRS tax alert.

https://www.irs.gov/pub/irs-utl/VTA_2011-08_Cash_for_Keys_Program.pdf