Our firm receives client trust deposits via electronic payments. These belong to the client but are held in trust until they are either billed or the money is returned. The provider issues a 1099-K for the gross deposits -- what is the correct way to offset this? It is not income to the firm. Do I enter negative miscellaneous income, create a miscellaneous expense, or enter the amount in returns and allowances?
I assume this is a common issue with trust accounts (sometimes known as IOLTA accounts) and electronic payments but I couldn't find any guidance on how to handle it in TurboTax or on the Schedule C.
Thanks!
