1099-misc box 3 rental damage payment

[krosenfeld]

The agency that manages my rental income reported $200 in Box 3 on 1099-MISC.   This money was for covering the damage incurred on the refrigerator in the property.   Turbotax wants to create a Schedule C (Business Profit and Loss) to handle this money which seems wrong.   How should this money be recorded?  Presumably it should not be taxable.  Thanks.

[KrisD15]

Since the income is reported in Box 3 as "Other Income" you will need to enter it as personal income.

Federal 

Wages & Income

1099-MISC and Other Common Income

Income from Form 1099-MISC

Be sure to answer the questions so that the program does NOT make it Self-Employment income

use "Rental Repair" as a description

None of the above for "uncommon situations"

No, it didn't involve work

Select only 2022 for the year you got this income

Enter the amount of the repair as a Rental expense on your Schedule E. 

[krosenfeld]

Are you suggesting creating another 1099-MISC for just this Box 3 entry? 

[KrisD15]

No.

Since the amount is reported in Box 3 on a 1099-MISC, the TurboTax program will not accept it entered in the Rental Section. 

The 1099-MISC needs to be reported "somewhere" on your return. 

Using the directions I gave above, you can enter that 1099-MISC income. 

Next, I am addressing the fact that I understand that this "income" was to pay for damage. 

Therefore I am suggesting you also enter the same amount (NOT ANOTHER 1099-MISC) as an expense. 

Because you are reporting an expense for the same amount as the income, both the expense and income are "zero'ed out". 

[krosenfeld]

I had used the process you described before, but it keeps wanting to create a Schedule C.

[HelenC12 · Accepted solution]

Please see the instructions below to enter your 1099-MISC form so a Schedule C is not generated by TurboTax:

1. Sign into your TurboTax account and select Continue.
2. Select Federal from the left side menu.
3. Type 1099-Misc in the search bar and click on Jump to 1099-misc.
4. On the Did you get a 1099-MISC? screen, select Yes. If you come to the 1099-MISC Summary screen, select +Add Another 1099-MISC located under the Total.
5. On the Let’s get the info from your 1099-MISC screen, enter the information on the form and Continue.
6. On the Describe the reason for this 1099-MISC screen, enter a description.
7. On the Does one of these uncommon situations apply? screen, select None of these apply, and continue.
8. On the Did the XXX involve work that’s like your main job? screen, select No, it didn’t involve work like my main job. 
9. On the How often did you get income for XXX? screen, select I got it in 2022.  
10. On the Did the XXX involve an intent to earn money? screen, select No, it didn’t involve an intent to earn money and Continue. Note: An intent to earn means obtain (money) in return for labor or services with the intent on making a profit.
11. The amount will be reported on Schedule 1 (Form 1040) Line 8z.

To preview your form 1040, click here.

[krosenfeld]

Thank you Helen and KrisD15 for your replies.   I finally got it to work by deleting the prior 1099-MISC and starting over.  This time your instructions worked 🙂

The problem is this Box 3 "other income" is increasing my tax liability because the expenses (schedule E) already exceed the rental income and so there is no additional offset.   I'd therefore be better off just including this income as "Box 1" rental income.   I guess there is nothing to be done about that.