Author Topic: 1099-MISC on rebate??  (Read 9519 times)

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Offline irvinetabby

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1099-MISC on rebate??
« on: April 17, 2017, 03:34:52 PM »
I bought a new build and my realtor gave me back half of the commission. However, she asked for my SSN and later sent me a 1099-MISC for the entire rebate amount!

I assume this is now considered my "other income" and I have to pay taxes on this, making my real rebate lot smaller. I've never heard of this. Any input?

Thanks!

Offline daedalus

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Re: 1099-MISC on rebate??
« Reply #1 on: April 17, 2017, 03:39:29 PM »
At least you didn't wait till the last day to ask.
 
Did you try searching?

http://www.talkirvine.com/index.php/topic,14967.msg300792.html#msg300792

Offline YellowFever

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Re: 1099-MISC on rebate??
« Reply #2 on: April 17, 2017, 04:15:32 PM »
.
« Last Edit: April 22, 2017, 10:31:31 AM by YellowFever »

Offline USCTrojanCPA

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Re: 1099-MISC on rebate??
« Reply #3 on: April 17, 2017, 04:46:11 PM »
I bought a new build and my realtor gave me back half of the commission. However, she asked for my SSN and later sent me a 1099-MISC for the entire rebate amount!

I assume this is now considered my "other income" and I have to pay taxes on this, making my real rebate lot smaller. I've never heard of this. Any input?

Thanks!

My input....don't give her your SSN.  It's not taxable income to you....you did nothing to constitute the definition of earned income.  Tell her to take the rebate that she gave you as a reduction of her total 1099 commissions (on Line 1) on Line 2 of her Schedule C. 
Martin Mania, CPA
AgencyOne
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CA CPA License # 107675
mmania001@yahoo.com
714-747-3884 cell

Often imitated....Never duplicated!

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Offline YellowFever

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Re: 1099-MISC on rebate??
« Reply #4 on: April 17, 2017, 04:49:48 PM »
.
« Last Edit: April 22, 2017, 10:31:29 AM by YellowFever »

Offline irvinetabby

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Re: 1099-MISC on rebate??
« Reply #5 on: April 17, 2017, 05:12:16 PM »
Darn it! I called her and she insisted she has to give customers the 1099, or else she would have to pay taxes on that amount.

Since I already gave her my SSN and the form was already mailed to me, I assume there is nothing I can do besides coughing up the money? :'(
« Last Edit: April 18, 2017, 09:24:09 AM by irvinetabby »

Offline aquabliss

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Re: 1099-MISC on rebate??
« Reply #6 on: April 17, 2017, 05:17:13 PM »
Like USC said:
http://www.nsbar.org/content/compensation-to-buyerseller

The IRS ruled that a payment or credit from the purchasers agent to the purchaser (i.e. a rebate) represents an adjustment to the purchase price of the home and generally is not includable in the purchasers gross income. The IRS also ruled that the agent did not have to issue a 1099 to the purchaser even if the rebate was more than $600.

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Offline YellowFever

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Re: 1099-MISC on rebate??
« Reply #7 on: April 17, 2017, 05:29:05 PM »
.
« Last Edit: April 22, 2017, 10:31:24 AM by YellowFever »

Offline irvinetabby

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Re: 1099-MISC on rebate??
« Reply #8 on: April 17, 2017, 05:31:38 PM »
Yeah I did some Googling and sent her bunch of links. She said she will contact her CPA (who's the one told her she needs to do that, and charges her $60 for each 1099 filed). But it's too late for them to withdraw the form, even if I manage to convince that stupid CPA.

I guess I'll just not file taxes on it, and if I get audited, I'll refer to that IRS letter.

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Offline USCTrojanCPA

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Re: 1099-MISC on rebate??
« Reply #10 on: April 17, 2017, 06:31:46 PM »
https://ttlc.intuit.com/questions/2910212-as-a-real-estate-agent-i-rebated-part-of-my-commission-to-the-buyer-after-the-close-of-escrow-by-writing-him-a-check-am-i-required-to-issue-a-1099-form-to-the-buyer

Yup....been saying the same thing for years and years but what do I know, I'm just a CPA.  haha   Btw, as some of you have already seen that not all CPAs are created equally...some are lazy and lack the most basic research skills (heck even google skills) which is SAD!

"The IRS has issued a private letter ruling that refunds of commissions by a real estate broker are not taxable income.  In the ruling that discuss that no Form 1099 needs to be issued by the broker, and the buyer would treat the refund as a reduction in the cost of the property.  See PLR 157111-06 (http://www.irs.gov/pub/irs-wd/0721013.pdf).

If your realtor has given you a Form 1099-MISC for any rebate they did so in error.  If they won’t issue a corrected form you would need to:

·         Prepare a return not including the amount on the Form 1099-MISC.

·         Attach a statement indicating why it is not reported (perhaps quoting PLR 1571111-06), and

·         File on paper.

Unfortunately, adding any statement to a tax return negates the ability to e-file."
Martin Mania, CPA
AgencyOne
CA BRE License # 01799007
CA CPA License # 107675
mmania001@yahoo.com
714-747-3884 cell

Often imitated....Never duplicated!

Offline qwerty

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Re: 1099-MISC on rebate??
« Reply #11 on: April 17, 2017, 07:38:16 PM »
Yeah I did some Googling and sent her bunch of links. She said she will contact her CPA (who's the one told her she needs to do that, and charges her $60 for each 1099 filed). But it's too late for them to withdraw the form, even if I manage to convince that stupid CPA.

I guess I'll just not file taxes on it, and if I get audited, I'll refer to that IRS letter.

They should be able Amend the form to say $0. It can easily be done by the cpa who issued it on your agents behalf.

Offline irvineempathy

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Re: 1099-MISC on rebate??
« Reply #12 on: April 17, 2017, 09:40:26 PM »

"The IRS has issued a private letter ruling that refunds of commissions by a real estate broker are not taxable income.  In the ruling that discuss that no Form 1099 needs to be issued by the broker, and the buyer would treat the refund as a reduction in the cost of the property.  See PLR 157111-06 (http://www.irs.gov/pub/irs-wd/0721013.pdf).

[/quote]

Sorry for my ignorance...what does reduction of property cost mean...just for tax/IRS purposes, right?

Offline Irvinemonk

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Re: 1099-MISC on rebate??
« Reply #13 on: April 17, 2017, 10:00:07 PM »
This brings up a interesting point. Is there a limit to the amount of rebate that the broker can offer the buyer?  Can they rebate say 90% to buyer? In which case the agent would only pay taxes on 10% and make a side deal with the buyer to get back some of that non taxed 90%... Of course the agent must be able to trust that the buyer will hold his end of the deal which is not going to be on paper.

Offline USCTrojanCPA

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Re: 1099-MISC on rebate??
« Reply #14 on: April 17, 2017, 11:41:57 PM »

"The IRS has issued a private letter ruling that refunds of commissions by a real estate broker are not taxable income.  In the ruling that discuss that no Form 1099 needs to be issued by the broker, and the buyer would treat the refund as a reduction in the cost of the property.  See PLR 157111-06 (http://www.irs.gov/pub/irs-wd/0721013.pdf).


Sorry for my ignorance...what does reduction of property cost mean...just for tax/IRS purposes, right?
[/quote]

That means if you bought the home for a $1m and your closing costs were $10k and your rebate was $5k...your tax basis in the home is $1m + $10k - $5k = $1,005,000 (versus $1,010,000 without the rebate).   So if you sell the home for $1,100,000 in less than 2 years your taxable gain would be $1,100,000 - $1,005,000 = $95,000. 
Martin Mania, CPA
AgencyOne
CA BRE License # 01799007
CA CPA License # 107675
mmania001@yahoo.com
714-747-3884 cell

Often imitated....Never duplicated!

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