Hi

I received The Regents Physician Loan Forgiveness Award Program for $10,000 in 2013 and will receive another 10,000 in 2014 , for which I am required to practice in under served area for 24 months which I am currently doing. I received a check for the 10,000 which I deposited to my account and made a payment towards my loans. I received a 1099Misc box 3 for the 10,000. Is this taxable income is my first question , since in the Tax benefits for education publication 970 page 35 states

Student loan repayments made to you are tax free if you received them for any of the following:

A state education loan repayment program eligible for funds under the Public Health Service Act.
or
Any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in under served or health professional shortage areas (as determined by such state).,


and if it's not taxable how should it be reported so it will not be taxed. Thank you.


Sincerely Confused

Zip Code: 11377

I think my first suggestion would be too reach out to the organization that paid you the $10k and generated the 1099, and provide them with the information you have about this payment being tax-free. Ask to speak to the person or group who generated the 1099 form, and then discuss with this person why you feel no 1099 should have been generated.

In the best case, they can give you their reasons for generating these 1099s. Or, maybe it didn't occur to them how generating a 1099 impacts the taxes of the recipients, and will issue corrected 1099s showing no taxable income (assuming they agree with your interpretation of the rules) for you and your colleagues.

Assuming you aren't the only person to ever receive this Award, there must be some rationale to why they prepared this 1099. The rules around awards like this one are somewhat confusing, specific, and fluid, and maybe no one at the organization is responsible for keeping current with them.

In my practice, I haven't seen this issue before. The reason might be that people in these loan forgiveness programs are not having any 1099s generated, so there is no form for them to show me when I meet with them for their taxes.

Let us know what you find out.

Zip Code: 01801