Incorrect 1099

[pmoscar794]

I terminated a commercial lease early.  Paid a fee.  A stipulation agreement was filed with the court that stated if the penalty was paid on time the lease was terminated 11/1/2019.  Penalty was paid on time so 11/1/2019 date is accurate.  The landlord is claiming $112000 in rental loss (when he agreed legally the lease terminated 1/15/2019. )    He sent me a 1099 MISC for $112000.  I can show the incorrect income on 1099 misc, where do I show the -$112000 so the income is zero.  The business renting the space shut down in 2019.  Filed the final return in 2020.  The landlord refuses to submit a correct 1099 MISC, or send me a correct one.  Know this one isn't easy.  

[RobertB4444]

A 1099-MISC is designed to show actual payments sent for a variety of reasons.  It sounds like your former landlord issued you the wrong form.  If he had issued you a 1099-C that would show debt forgiveness income to you because you were forgiven of a legitimate debt that you owe (if any rent that you owed for months that had already passed were forgiven).

If it is indeed a 1099-MISC that you received then you should put it on a schedule C with a corresponding expense labeled "Incorrect 1099." It isn't a perfect solution but it's the best the IRS has for when someone refuses to correct an incorrect 1099.

You don't say how your former landlord arrived at the $112,000 figure.  If it represents the amount of rent that you paid you can create a 1099-MISC representing the rent paid and issue it back to the landlord.  The two amounts being identical will cancel each other out.  Be sure to put them both on your tax return regardless, though.

[pmoscar794]

Thank you so much for your reply.

I actually don't know how the landlord came up with the $112000.  Our lease was 5 years.  The total amount of the lease was $150000.  I assume its the balance of the lease.  Per an email he is saying its his loss of rent.  We went out of business in 2019.  We were evicted for non-payment of rent.  He filed a claim - negotiated, filed a lawsuit against us, etc.  Anyway, the negotiation ended up being a payment of $30000, which we paid.  Per the settlement agreement in the mind of the court, and per the court documents which he signed, he agreed the lease was terminated on 11/1/2019.  Since the court terminated the lease formally on 11/1 based on the 30k payment not sure how he can claim loss of rental income or debt forgiveness.  There is nothing about forgiving the debt in the court doc's just that he agreed the lease was terminated 11/1/2019.  Not sure if this makes a different or not.  I already filed taxes, took all the loses and closed the business down in 2019 tax filing.

[RobertB4444]

Based on what you have said it sounds like your landlord has created a fictitious deduction for his taxes based on what they feel like you owe.  

Your best solution given the circumstances is to create a schedule C, enter the $112K as income, then create an expense for "incorrect 1099" for $112K as well and then send it in. 

You may receive a letter from the IRS about it so be prepared for that - write out an explanation of what occurred and gather and make copies of the documents from the court that show the settlement agreement so that you'll be prepared to send them in quickly if a letter arrives.