I received a 1099-MISC that overstated my nonemp compensation. Business was sold and old owner refuses to correct. Where do I enter the adjustment to correct my income?

[itpirt]

I have already spoken to IRS. They said to ask Turbo Tax about which line to use in terms of reporting the correct income that was actually received. Should I add a Misc Income item (negative amount) for Income Not Received - Incorrect 1099_MISC? Or is there a better way to handle this?

[rjs]

Don't enter a negative income amount. The IRS compares the total income reported on Schedule C to the total of the 1099-MISC forms that you received. If the total income that you report is less than the total of the 1099-MISC amounts the IRS will think that you did not report all your income.

You could enter the correction as a business expense. But why is the 1099-MISC wrong? Is it just a mistake, or did they include a payment they did make that you that you don't think should be included? If that's the issue, what was the payment for that you think should not be included in the 1099-MISC?

[itpirt]

Thanks for your reply. I have no idea why/how the nonemployee compensation is overstated, but she has had to correct my 1099 in prior years. So maybe poor accounting practices on their part? She refuses to correct now bc she sold the business. I just want to report what I actually received as income. This is a small part time contract gig. I have multiple gigs and other SE income. Adding a line of Other Self Employment Income as a negative seemed to get to the correct income received. If I entered an extra business expense, wouldn't I be overstating both my income and expenses to get to the correct net amount? I don't know if that matters or not, but just trying to figure out the most correct way to fix someone else's error. Thank you for your help.

[Critter-3]

Enter the incorrect amount in income ... then make an adjustment entry in the expenses section ... use the "make your own category" option at the end of the expenses section. 

There are 17 unique categories for entering business expenses in the TurboTax Home and Business program for a Schedule C.  If you have a particular expense that does not fit in the other 16 categories listed use Other Miscellaneous Expenses at the bottom of the list.

• Click on Business
• Click on Business Income and Expenses
• Click on I'll choose what I work on
• On Profit or Loss from Business, click on the start or update button

On the next screen, click on Edit for your business listed.

On the next screen scroll down to Business Expenses

On Other Common Business Expenses, click on the start or update button

[rjs]

You have to enter the full amount that's on the 1099-MISC, even if it's wrong. If you don't, the IRS computers will pick it up as underreporting, and you will get an IRS notice saying that your tax return is wrong. The IRS doesn't see the individual income lines that you enter in TurboTax. They only see the total. That's why I suggest entering the correction as a business expense. Critter-3 is suggesting the same thing. Follow her instructions for where to enter it.

However, if you are reporting other self-employment income that was not reported on a 1099-MISC, you could subtract the correction from that income. The important thing is that the gross income on Schedule C (line 1) is at least as much as the total of all the 1099-MISC forms you received. As long as that's true, you won't attract the IRS's attention.