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  • Odd (I think) tax qustion

    I have what I think is an odd tax question and I’m hoping some of you helpful folks might have some advice.

    I recently started as an attending and was given a $25000 forgivable bridge loan when I started. It is forgiven over a 12 month period. As of Dec. 31, 2019 3 months had been forgiven as I had worked there 3 months at that point. Around Dec. 18th I noticed $6250 had been added to my gross income, I inquired and was told this was what had been forgiven so far and counted as income for 2019. Fair enough.

    Then about 2 weeks ago I got a 1099-Misc for $25000 for the forgivable bridge loan. Well, the $6250 was already added to my gross income (they did not pay me that $6250 of course--just simply added it to my gross income amount) via the company’s payroll department, which they will apparently do again this year for the remaining amount that will be forgiven.

    So, I’ll be paying my regular tax rate already (for 2019 on the $6250 that was added to my gross income). So what do I do with the 1099-misc? I contacted my payroll and they were simply confused. Not surprising since they also have on my w2 that I only contributed (via payroll deduction) $70 to my HSA even though I contributed $4500. Sigh.

    Anyway, any thoughts or advice would be appreciated.

  • #2
    Originally posted by Stumped View Post
    Anyway, any thoughts or advice would be appreciated.
    Yeah, tell them to fix their terrible payroll & human resources departments.

    I'd ask for a corrected 1099. But I don't know if a 1099 can be corrected to $0. Or redacted.

    Same for the HSA error. Corrected W2.
    "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be.

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    • #3
      Ask them to amend the 1099 to $0. If not, you need to report it on your return with an offsetting expense on Schedule C to avoid an IRS computer matching issue. The expense makes sure you don't pay taxes on it.

      1099s are not binding on the recipient. They're just an opening argument. In the event the IRS sends you a CP2000 notice for not reporting it, you explain to them what you explained here and refer them to IRC §6201(d). Tell them you're providing a "reasonable dispute" and that will put the burden back on them to prove the 1099 is accurate.

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      • #4
        Thank you so much, I really appreciate the information!

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        • #5
          Yes, they can file a corrected 1099 for $0. But you might simply want to file the sch C for $25k and then take a deduction for the $6,250 with a description "already reported on W2" or something similar. Arrange with payroll to NOT report the rest on W2 in 2020.

          If you have the custodial statement that the full $4,500 actually went in to your HSA, you could just report the $4,430 as a deduction on Form 8889.

          Are you working for a really small practice? Does the partner's spouse handle payroll? Or maybe a different firm prepares 1099s than prepares the payroll? This is really bad.
          Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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          • #6
            Originally posted by jfoxcpacfp View Post
            Yes, they can file a corrected 1099 for $0. But you might simply want to file the sch C for $25k and then take a deduction for the $6,250 with a description "already reported on W2" or something similar. Arrange with payroll to NOT report the rest on W2 in 2020.

            If you have the custodial statement that the full $4,500 actually went in to your HSA, you could just report the $4,430 as a deduction on Form 8889.

            Are you working for a really small practice? Does the partner's spouse handle payroll? Or maybe a different firm prepares 1099s than prepares the payroll? This is really bad.
            Thank you so much. I had contacted them and they said they were able to correct the 1099 to $0. Of course they then gave me a "corrected" w2 where they added $6250 into box 1, even though the original $6250 had already been added into my gross pay. Sigh.

            And nope, they are not a small practice. It's a hospital chain. I won't say which one, but so far their payroll/accounting seems to need some help!

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            • #7
              Originally posted by Stumped View Post

              Thank you so much. I had contacted them and they said they were able to correct the 1099 to $0. Of course they then gave me a "corrected" w2 where they added $6250 into box 1, even though the original $6250 had already been added into my gross pay. Sigh.

              And nope, they are not a small practice. It's a hospital chain. I won't say which one, but so far their payroll/accounting seems to need some help!
              Are you saying they have double-reported it to you? If so, you may need to call the IRS and/or file Form 4852 to report a corrected W2. This article is helpful. One or the other should get their attention. This is incredible. Wonder how many other doc's are receiving incorrect documents and don't even realize it.
              Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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              • #8
                As long as paycheck go out, W-2’s tie to 940’s, and W-3 and deposits are made “timely “ everything looks great. All the other boxes are “information reporting “. Except it really screws up the works. IRS accepts corrections readily.
                Little incentive for employers to invest in systems or software. Usually the trend is , why don’t we outsource this? That doesn’t address the “information reporting”. Most entities won’t invest in fixes of non-routine adjustments, like a signing bonus repayment or others that come out of AP. Two different systems and probably different managers as well. Are you surprised HR/PR doesn’t get along with Accounting?

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                • #9
                  Just received the same thing for my wife's forgivable loan - they've been adding the $$ to her gross wages and withholding tax on the forgiven amount. Just received a 1099-misc for the total of the loan. I suspect it may have to do with the fact that the 1099 went to our old address where she did residency vs. current address where she now is an attending? You would think a very large non-profit hospital would have this figured out, but hopefully I don't have the same issue you encountered Stumped

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                  • #10
                    Originally posted by East coast View Post
                    Just received the same thing for my wife's forgivable loan - they've been adding the $$ to her gross wages and withholding tax on the forgiven amount. Just received a 1099-misc for the total of the loan. I suspect it may have to do with the fact that the 1099 went to our old address where she did residency vs. current address where she now is an attending? You would think a very large non-profit hospital would have this figured out, but hopefully I don't have the same issue you encountered Stumped
                    Good luck, I hope it all works out for you!

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