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I need to make a 1099 misc other income from a county for covid relief non taxable- where can I make a change

ragreen
Level 1

Client received covid relief from County.  County sent out 1099 misc form with other income box checked.  This seemed to be the wrong form.  They have no idea.  Now I need to adjust the income to non taxable. Where can make an adjustment to other income from a 1099 misc?

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8 Replies 8
pamdory
Level 7

Was this a grant made to an individual or business?  

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pamdory
Level 7

Most Covid-related grants from state and local governments made to businesses ARE taxable.

 

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ragreen
Level 1

Said it was not business.  That is why I am under the impression it is not taxable.  He received 2 grants for $1,500 each.  Federal money given to counties.

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qbteachmt
Level 15

"Seems to be disagreement as to if it is taxable or not."

There really is not; once you know about the grant, it's easy to determine.

Who stated "not business?" Their grant application will tell you the specifics. You stated "County" and these typically are taxable Federally. It might not be taxable State. What matters is, a specific regulation or law excludes it, or not. If Not specifically excluded, it is taxable.

Go here: https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions

That explains how the money filtered down. I have had this browser tab open for over a year:

https://commerce.mt.gov/Montana-Coronavirus-Relief/Awarded-Grants

And that has a MT reference that it is Taxable and they even link to that same IRS link I already gave.

About the only grants that are not taxed under the CARES funding is, for instance, specific HVAC improvement, Medical provider grants, and a few others which are codified in the funding language authorizing the fund disbursements.

No one can tell you without more details. We don't know the State, the reason, etc.

The majority of these grants are taxable. I've been following this since they got released. A majority of my clients are towns and local governmental entities.

 

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qbteachmt
Level 15

Oh, I forgot: another grant that won't be taxable is Closed Venues. But they never paid out these funds in 2020.

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ragreen
Level 1

Great info and help!!!!!!!!!!!!

 

Thanks so much!

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qbteachmt
Level 15

"Now I need to adjust the income to non taxable. Where can make an adjustment to other income from a 1099 misc?"

Is the grant for something specifically excluded for tax purposes per some law or regulation?

You don't change the form type, and the 1099-Misc or 1099-G is not what controls if that is taxable or not. That doesn't make this an error, either. You would need to understand the grant, what it was applied for (the qualifying need) and what it was meant to do.

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"Level Up" is a gaming function, not a real life function.
ragreen
Level 1

Seems to be disagreement as to if it is taxable or not. County had no clue.  They actually called H&R Block. And received 2 different answers.  They did not know which form to send out to.

 

It was Federal money given to the County.

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