1099 Misc Box 3

[S T]

I have not seen this before

Time Warner Cable Service issued a 1099 Misc to a Single taxpayer age 60 for $ 745, which represents a special program for low income Seniors applying for relief on their Cable Service.

Anyone received one of these from the Utility or Cable Services for payment reductions on services?

I know the reporting on line 21 - just seemed odd to me that TWC would issue a 1099 Misc.

T/p does in fact have to file a tax return and does have tax liability.

Thanks,
Sandy

[taxea]

My guess is they intend for the TP to pay taxes on the service fee they waived. l would input on ln 21 not subject to SE tax.

[Koss]

Time Warner

I think that's utterly bizarre. I would challenge it as a matter of principle.

Either we don't have all the relevant facts, or someone at Time Warner has made a serious mistake. It just doesn't make sense.

If your client had been the recipient of some sort of grant, where the money was coming from a third party, then maybe I could begin to see a convoluted explanation. But if that were the case, the Form 1099-MISC would have been issued by the third party.

Did your client actually receive a check from Time Warner? Even if they did, it still doesn't make sense, because in this context, the check would represent a refund of fees that they had previously paid.

Regardless of whether they received a check or simply a credit applied to their account, I don't see how it could be taxable income. Box 3 on Form 1099-MISC is used for certain types of "taxable awards," which includes certain kinds of taxable scholarships, fellowships, grants and stipends given to students and researchers. It also includes prizes that are not gambling winnings, such as winning concert tickets by calling into a radio station.

But I don't think this is an appropriate use of Box 3.

What I find disturbing is that if this is in fact a mistake, then it has probably affected a large number of Time Warner customers, i.e., all customers who received such a discount.

I suspect that some bonehead accountant at Time Warner's corporate office decided that it was somehow a taxable "grant."

I don't understand how the money could even be considered income. There is an important difference between nontaxable income and money that is not even income in the first place. An inheritance, for example, is not even considered income. On the other hand, municipal bond interest is definitely income, but it is usually not taxable.

This could be some sort of domino effect. If Time Warner received a grant from a nonprofit org or a government agency, to provide reduced rates to certain customers, someone at that agency might have decided to issue a 1099 to Time Warner--for several million dollars.

I'm not even going to try to figure out whether such a payment would be taxable income to Time Warner. We don't have enough information, and it doesn't matter. Whether it is taxable to Time Warner does not necessarily determine whether it is taxable to the customers who benefit from it.

So how do you challenge it?

Option one: Enter it on line 21, and then back it out as an adjustment. You can have two entries on line 21--one positive and one negative--so it washes out. Or you can get creative and find a way to enter a manual, write-in adjustment on line 36. Either way, you should also attach an explanation to the return. Keep it really short and really simple. Something like: "Reduction of cable bill granted to senior citizens. 1099-MISC issued in error by cable company. Not taxable income."

Option two: Challenge it by asking Time Warner to issue a corrected Form 1099-MISC. Good luck trying to reach someone who has the authority to do that. Does the 1099 have a phone number? If so, they might be getting a lot of calls. Maybe it's a "known issue" that they are investigating, or working to address. Might be worth a shot.

Or you get more aggressive, and fax a strong letter to Time Warner's executive offices. I would send it to their general counsel. Imply that you'll take the case to the media if you don't get a prompt reply. Okay, wait a minute... Time Warner is the media...

Did your client fill out an application for this thing? I'd like to know more about the program. That might help unravel the mystery.

I don't think Time Warner gave your client any money. That's why I don't get it.

If I have rental property, and I agree to take less than the full rent from a tenant because they are unemployed, or because they are experiencing some other form of economic hardship, is that taxable income to the tenant? No way. It's also not deductible for me. On my side, it is reflected as lower gross rent.

It just doesn't add up. Something is wrong with this picture.

I work with a nonprofit org that may be able to help your client challenge Time Warner. E-mail me if you want.

Large, evil corporations can't be allowed to get away with this kind of nonsense. It's absolutely ridiculous.

BMK

[Koss]

Observation

My guess is they intend for the TP to pay taxes on the service fee they waived. l would input on ln 21 not subject to SE tax.

It is federal law that determines whether the taxpayer must "pay taxes on the service fee they waived." The "intent" of the party that waived the service fee is irrelevant.

See my comments above. It think this may be a serious mistake.

BMK

[Burke]

Time Warner Cable Service issued a 1099 Misc to a Single taxpayer age 60 for $ 745, which represents a special program for low income Seniors applying for relief on their Cable Service. Thanks, Sandy

The instructions for completing 1099MISC do not refer to anything like this requiring such reporting. It is a discount for services, unless they actually paid her this amount in cash. Not taxable. Sometimes these companies get bad advice as to what they should be reporting.

[Koss]

More thoughts

S T is in California.

California has some strange rules for sales tax. In many cases, when a discount is applied, the vendor is required to collect sales tax on the undiscounted amount.

That still doesn't explain the 1099-MISC. I stand by what I said in my earlier post. The client should not treat it as taxable income.

But it may explain the bonehead factor. Someone at Time Warner may have accurately stated that customers "have to pay sales tax on the full amount." Someone else may have then paraphrased that concept by saying something like, "the amount of the discount is taxable to the customer." And by the time a third person at Time Warner heard this bit of information, it had been mangled into a taxable grant or award.

This is nothing but educated guesswork.

Someone's gotta stand up and fight this kinda bu****it. I would enjoy communicating with Time Warner about this. I would see it as a challenge to find the right person, who could have an intelligent discussion about why they issued Form 1099-MISC.

BMK

[S T]

Koss and others thanks for your thoughts - I was hoping for some feedback

Very strange indeed

In talking with the client it was because of "lower income" and TWC agreed to waive part of or all of the monthly fee and then issued this 1099 Misc - Box 3 amount of 758.25 - just seemed odd to me as I have never seen this done with the Electric or Gas Cos when a low income person has substantiated and applied for relief of a lower fee.

Tried to "google" TWC and see what I could find - but nothing revelant

So not really sure how I will deal with on her tax return -

Sandy

[taxea]

This sounds more like a discount on fees to me. I think the client needs to get something in writing that explains this. TW may even have it posted on their website.

[taxea]

I have not seen this before

Time Warner Cable Service issued a 1099 Misc to a Single taxpayer age 60 for $ 745, which represents a special program for low income Seniors applying for relief on their Cable Service.

Anyone received one of these from the Utility or Cable Services for payment reductions on services?

I know the reporting on line 21 - just seemed odd to me that TWC would issue a 1099 Misc.

T/p does in fact have to file a tax return and does have tax liability.

Thanks,
Sandy

I am a night owl and this post made me curious so I did some research for you. I found out during a online chat with TW the following:
The special program is a promotion. The requirements are different depending on location of the senior. It appears it may be based on the differences in median income around the country. It is a discount on fees for qualifying seniors. TW is aware that the 1099k's are being issued and they are being issued to all seniors who's account has been discounted 600. or more. I don't know whether it was this forum or the tax almanac forum but I recall a flurry of posts around the time that 1099ks were "invented". We were all trying to figure out who was required to issue them and under what circumstances. I believe this is why they are being issued. You might want to do a search for the other posts from last year.

[S T]

Not a 1099K - it is a 1099 Misc - Box 3

Sandy

[Burke]

I am a night owl and this post made me curious so I did some research for you. I found out during a online chat with TW the following:
The special program is a promotion. It is a discount on fees for qualifying seniors. TW is aware that the 1099k's are being issued and they are being issued to all seniors who's account has been discounted 600. or more.

Regardless of form, it is still a mistake. They should NOT be issuing these. Even if she paid the full amt and they sent her a check, it would be a rebate and not income.

To ST: I would input and deduct on Line 21 worksheet with explanation. Usually these forms have a contact phone number on them. If so and you want to see what they have to say, call and ask them where in the tax code or instructions for 1099MISC it says this is a reportable income item.

[Jiggers]

If this is legitimate, shouldn't the states be issuing 1099's for all those receiving food stamps?

And those receiving reduced rent on special housing. (The states or agencies pay the difference to the owner of the rental).

And those receiving reduced or no medical bill for services?

And on and on and on.

[Koss]

Form 1099-MISC

Sandy--

I've done a little digging on this...

I have a feeling your client may not be giving you all the relevant facts. I am not suggesting that your client is intentionally deceiving you. But your client may not fully understand the type of discount they received, and they may not have described it accurately.

Does your client live in an apartment community? Are they serving in the role of an ambassador in the community on behalf of TWC, by promoting Time Warner Cable services to other residents, and providing information and guidance on ordering and obtaining service?

Burton

[S T]

T/P is Age 60 in a Mobile Home Park, is the Manager of the Park (small Park about 100 spaces)
She claims she applied with all utility services including TWC for reductions based on low income limits.

She is under the impression it was a reduction - not a promotion - but then we know how some taxpayers mis-construe information.

Thanks,

Sandy

[Koss]

TWC Courtesy Service

Your client is the property manager.

I think she's getting something called Courtesy Service. Under certain conditions, TWC provides a basic cable package at no cost to property managers who live on site. They pay for premium services, and for anything that is not included in the courtesy package.

Take a look at this:

http://www.timewarnercable.com/texas/courtesy/ctx/guidelines.html

And here's an application for the program, which says that the applicant has to fill out Form W-9. Hmmmm?

http://www.timewarnercable.com/texas/courtesy/ctx/customer_form.html

Are you ready for the punchline?

http://sgaweb.net/cbllc/FAQsre1099final.pdf

BMK