We had $31,000 dollars worth of storm damage in August of last 2010, my insurance company paid $30,000 to my mortgage company. My mortgage company released $20K worth of funds to me in 2010 to pay for the repairs, just yesterday I received a 1099-MISC for $20k. Of course I was not expecting this and filled my taxes the day before. Now what do I do?

I’m thinking that I should amend the filling and show the 1099-MISC as income and list the damage as a deduction of $20k with my insurance paying me $0. My thought is that my insurance company paid my mortgage company and not me, this should even out my 1099-MISC Income with a deduction. Any thoughts.

Thanks….

“ Of course I was not expecting this and filled my taxes the day before. Now what do I do? “-->As the original tax return didn’t include that money, $20k on your return as part of your gross income, you should file your amended return , 1040-X; you should probably file an amended return. The IRS might see that you didn't report that income and wonder what other mistakes/oversights there might be.
Also, once you have determined the casualty loss amount, the loss will need to be reduced by any reimbursements received or expected from your homeowner's insurance claim and then reduced again by $100. A taxpayer can then deduct the final amount as an itemized deduction if it exceeds 10 percent of your adjusted gross income. You claim your tax deduction by filing Form 4684 and itemizing your deductions using Schedule A. Please note, casualty loss deductions are not subject to the itemized deduction phase-out rules that are based on adjusted gross income.
“I’m thinking that I should amend the filling and show the 1099-MISC as income and list the damage as a deduction of $20k with my insurance paying me $0.”----> Agreed; I guess you need to contact your mortgage company to know why your mortgage company has sent you 1099MISC Form. Ifit is correct form for you, then probably, you should report 20K on form 1040 line 21 as other income.
“ My thought is that my insurance company paid my mortgage company and not me, this should even out my 1099-MISC Income with a deduction.”----> Every insurance company will put the mortgage company on the check if the damages are over a certain amount . For most, it is $5,000.00. This is a fail safe for the insurance company and the mortgage company. Fro example, say , you have an older home, that might not be worth a lot of money, but to rebuild it after a devastating fire would be more than the market price of the home. Without the mortgage company on the check, the homeowner could just take the money and abandon the home to the mortgage company. In certain instances the mortgage company could force the insurance company to pay the claim again, to them, because they are an insured on the policy too. That is the power that the mortgagee clause of the policy gives to them. They have a vested interest in making sure the house gets repaired.