So far the best advice I've derived from my research is that this 1099-NEC that I received from the company I got royalties from should have been a 1099-MISC because it is intended as intangible royalty income, not self employment income. Entering it as a 1099-NEC is going to force me into Self-Employment in TurboTax even though it does not apply to me.
I was advised to do the following;
- Remove the 1099-NEC from TurboTax
- Go to Federal "Wages and Income"
- Go to "Rentals, Royalties, and Farm" and select the Schedule E.
- Fill out the Schedule E info
- Enter the my royalty income in Box 2 of a 1099-MISC as it was intended
- Entering the income reported on a 1099-MISC instead if a 1099-NEC could end up generating a letter from the IRS because the income wasn't reported on Schedule C. You can be prepared for this easy explanation that the royalty income reported on Schedule E was incorrectly reported on Form 1099-NEC. Because it was royalties and not a working interest, it was reported correctly.
- Navigate to my 2022 return and amend that by following the same instructions I followed above
- Contact the company I am getting royalties from to request they correct my 1099s in the past and going forward to be 1099-MISC, not 1099-NEC
