taxes96786
Level 9

To avoid a letter from IRS...knowing you don't have to report this: here is what I do:

Report the 1099 and adjustment with a statement in the line box that says:

Pursuant to IRS code XXXXXX this is not taxable income. The funds were used for ........

Be sure client retains the "proof of" documents with copy of tax return.

0 Cheers