I got a 1099-MISC from Microsoft.

Maybe this belongs in the Lounge or Chit Chat.

Apparently they gave me $680 in misc. income this year. Now I have to pay $200 in taxes on software I received as a payment for a survey. Is this fair considering there isn't anyway in hell the software is worth $680 MSRP?

Keep this in mind the next time a company offers you "free" software as payment to do a survey.

2/25/2010 12:52:00 AM

Microsoft has software worth $680?

2/25/2010 12:52:46 AM

Office 2007 Ultimate - $679.95

2/25/2010 1:01:33 AM

wow

i wonder if that's for some weird accounting thing on their end where they count that as a "sale" from them giving it to you?

2/25/2010 1:12:08 AM

LOL - they probably struck a deal with the gubment to get ur moneyz

2/25/2010 1:12:24 AM

if they actually gave me $680 and i had to pay $200 on that i wouldn't care.

but over valuing your software and then reporting it as misc. income instead of a gift? that's jacked up.

2/25/2010 1:14:17 AM

sadly the limit of these things is $600.

If you had gotten $599 worth of software it would have been tax free

2/25/2010 1:50:26 AM

hahahaha. pwnt

2/25/2010 1:57:50 AM

Pretty sure you can avoid this. You should be able to claim the actual market value of the software (~290 dollars) as your actual income instead of the MSRP. That gets you under the cap and out of the tax. I would double check this with a tax professional of course.

I agree that is extremely silly, especially given the monstrously difference between msrp and actual market price. But do keep in mind that it was PAYMENT for a service, and is taxed. There's unfortunately nothing a company can legally do about that for any payment over that magic cap number.

2/25/2010 2:34:00 AM

Haha, oh, ouch. I'd definitely talk to your tax person about this. And good luck!

http://taxes.about.com/b/2006/04/14/correcting-1099-misc-statements-for-nonemployee-compensation.htm

Quote :

"Ask the company to send you a corrected Form 1099-MISC. If that fails, report your income based on the records you have of their payments to you. For example, you might have invoices or bank deposit slips. If there’s a mis-match between the amount of income you report and the amount of income that the company reported to the IRS, then the IRS will audit your tax return. Simply provide the auditor with documentation for how you calculated your business income, and inform them that the 1099 was incorrect. Then the IRS may audit the company. Additionally, the corporation may have to pay a penalty for failing to report the correct amount of income on Form 1099-MISC. The penalty is $15 per incorrect 1099 if the corrected 1099 is filed within 30 days of the original deadline for filing Forms 1099 and 1096 with the IRS. The penalty rises to $30 per incorrect 1099 if the correction is filed by after 30 days but before August 1, and $50 per incorrect 1099 if the correction is filed after August 1. The IRS will waive the penalty if the corporation can show reasonable cause."

But hey, at least you're not as bad off as these guys

http://community.lawyers.com/forums/t/82086.aspx

Quote :

"My 1099-misc shows non-employee compensation of $34,000.00 when it should show $7500.00! I can not get them to send me a correction on the IRS correction form. They have sent a "white out" change which I know won't get filed with the IRS. My college financial aid will be denied if they won't issue the proper correction. The IRS told me to file my 1040 with the correct numbers and then wait 2 years for an audit to prove my amounts! IRS also suggested filing a fraud form but this won't fix the financial aid mess and I will lose my job. How can I make this company give me a 1099-misc correction that they file with the IRS. I am smelling a huge CYA."

http://en.allexperts.com/q/Tax-Law-Questions-932/1099-misc-4.htm

Quote :

"i received a 1099-misc form from my city because i was forced to move under the eminent domain clause. the city purchased the property and evicted me. they paid each resident 5250.00 dollars plus moving expenses. i was told at the time that it was tax free, well now i have this form from the city stating that i have nonemployee compensation (every other field is blank) in addition to my w-2's and i dont know how to claim this. what would happen if i didn't claim the 1099-misc? also, i already filed an ez form (before i knew about the 1099) and i am expecting my refund in 4 days, do i now need to file a 1040x and then wait 10 weeks to hear from them or what? man, i'm lost........if people would just be honest."

http://www.flyertalk.com/forum/american-express-membership-rewards/918968-1099-misc-amex-purchase-protection-2.html

Quote :

"1099-Misc from Amex for Purchase Protection?!? Actually the item is not "LOST" because I mailed it back to Amex for the refund. Basically, Amex is telling the IRS that this cardmember received $1000 from us and you guys, IRS, should know there is a $1000 TAXABLE gain. Thus, although I do not have anything to show for...the IRS now is going to tax me on the $1000 from Amex. Mind you, I paid for the toners myself with AFTER-TAX money and now I have to pay TAXES on a REFUND by Amex! To me, this is ridiculous... I have nothing against the IRS...it is AMEX that I'm really PO'ed with. Why report the $1000 as taxable GAIN to the cardmember? They can always write off items as loss on their behalf. I remember a while back purchasing the 1st generation iPhone and was given a $100 credit from Amex because of Apple changing the price one month later. I didn't get a 1099-Misc on that $100 credit... I think Amex is now trying to screw as much cardholders as pssible and dumping everything to offset losses. Thus, they won't have to report to shareholders that their actual loss is greater than it seems..."

[Edited on February 25, 2010 at 6:40 AM. Reason : .]

2/25/2010 6:36:54 AM

ouch that sucks.

2/25/2010 7:16:37 AM

I had ms try to pull this shit on me before. you have to read the fine print of the form where you select what you want for your services. it explains you'll have to pay taxes on anything over $600

2/25/2010 7:48:57 AM

Quote :

"I agree that is extremely silly, especially given the monstrously difference between msrp and actual market price. But do keep in mind that it was PAYMENT for a service, and is taxed. There's unfortunately nothing a company can legally do about that for any payment over that magic cap number."

Oh I understand it's payment for a service, I get that part. But what bothers me is that Microsoft reports it to the IRS as such an inflated amount. I mean paying $200 in taxes on a product that sells for $280-$300, that's absurd!

It actually hurts me rather than helps me. Give me software for free as payment, but then i get charged $200 from the IRS? It's not like I received $680 in cash that I can magically take $200 out of the $680 and pay the tax with. I received a piece of software.

Next time I'd just assume get cash for my service.

Anyhow, not a big deal, I did sell it on eBay for $280, so I still came out +$80, but still thought my time was worth more than that. Just sucks to pay 71% tax on something

[Edited on February 25, 2010 at 12:07 PM. Reason : .]

[Edited on February 25, 2010 at 12:08 PM. Reason : .]

2/25/2010 11:56:09 AM

^Dude, you don't have to pay it. Read what I (and others) have written. With taxable gifts like that, you can absolutely assess fair market value as the income amount.

Since that number is WELL below the threshold for reporting, you should never have a problem. No way in hell I would pay against MSRP.

2/25/2010 1:12:19 PM

I did read what everyone posted, I don't see proof that I don't have to report it if it's under $600.

Microsoft reported it to the IRS as giving me $680 of misc. income.

If I don't show that on my tax form, or if it's something different it's a red flag. Otherwise my best bet is trying to get Microsoft to reissue a corrected 1099-MISC with the "fair market" value, which I'm pretty sure they won't do.

[Edited on February 25, 2010 at 2:00 PM. Reason : .]

2/25/2010 1:58:20 PM

^^ you have to reportall income regardless if itmet the 600 threshold for the payer to report it. Basically prospero is fed because like he said the IRS knows about the 680. If it gets adjusted to 280 the IRS will still know about the income and he'll have to pay taxes on the 280.

2/25/2010 2:22:02 PM

I'm not a tax man nor have I had to personally do it but I don't see why you couldn't report the difference as a loss on a schedule D. That is, you got something "worth" $680 and sold it on ebay for $280 so you'd be able to claim the $400 as a deduction, no? If you had actually kept the software, you could claim FMV.

2/25/2010 4:19:03 PM

^^ yeah, thats what I am thinking ... MS is only REQUIRED to report if its over 600 ... but since they are claiming it as a loss (and thus getting paid by uncle sam instead of the consumer), they are going to report it no matter the amount.

2/25/2010 4:47:21 PM

why not just leave it off your return. What are the odds the IRS will audit you anyway over $100 in unpaid taxes.

2/25/2010 7:19:51 PM

because i like to do my taxes right.

2/25/2010 7:22:23 PM

Not to mentin it's such an easy thing that the IRS will get you over. They'll actually send you a bill if your reporting doesnt match what was reported by a company. Had it happen a few years ago with a stock sale I did.

2/25/2010 9:05:30 PM

Do brokerage companies NOT have to report dividend income under a certain amount??

I have accounts with two brokerage companies AST and Computershare. Each account has only a handful of shares with which paid dividends that were reinvested. The total dividends for EOY 2009 were $3.76 and $3.08 respectively. I have been trying to find the 1099-DIV form with which the Computershare one never arrived and the AST form is blank.

Do these dividends not get reported for being under a certain amount?

2/25/2010 9:20:57 PM

I Think it's 10 dollars.

2/25/2010 9:32:48 PM

Quote :

"I did read what everyone posted, I don't see proof that I don't have to report it if it's under $600. Microsoft reported it to the IRS as giving me $680 of misc. income. If I don't show that on my tax form, or if it's something different it's a red flag. Otherwise my best bet is trying to get Microsoft to reissue a corrected 1099-MISC with the "fair market" value, which I'm pretty sure they won't do."

I didn't say not to report it. I said to report it at fair market value (~290$) that you sold it for. Yes, you will probably get audited. It's not a big deal. You'll just have to show proof of fair market value (that you sold it new on ebay works just fine) and that's that.

Audits aren't some big deal, they happen all the time, and it's sure as hell worth saving 200 dollars to go through the one letter it will take to resolve it.

2/26/2010 3:01:57 PM