You can just not report the 1099-MISC or enter it and back-out the income.
This is the same as an insurance payment for repairs, it is not taxable income.
a) Enter Form 1099-MISC so the IRS can match it
b) Back out the income so you are not double-taxed
To do that-
Enter the 1099-MISC Under
Wages & Income
Other Common Income
Income from Form 1099-MISC START
Enter the 1099-MISC as it was reported, Type "property damage reimbursement " or something similar for the description,
Select "None of these apply" for uncommon situations,
"NO" not like main job,
Only got it in 2024,
"NO" no intent to earn money,
DONE
THIS GETS THE FORM ON YOUR RETURN, now back out the double income-
Wages & Income
LESS COMMON INCOME
Miscellaneous Income, 1099-A, 1099-C START
Scroll all the way down to the LAST option- Other reportable income START
Type "property damage reimbursement" on 1099-MISC" or some other description the IRS will understand and enter the amount AS A NEGATIVE AMOUNT (put a minus sign (-) in front of the number
Done
The 1099-MISC as well as the negating entry will both be on Schedule 1 line 8z
This results in zero income
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