You received a 1099 reporting income paid to you but you did not receive the income.
Your first alternative is to appeal to the issuer of the 1099 asking them to repay the income, or withdraw or cancel the 1099.
If the 1099 will not be withdrawn, you want to report the income because the IRS will be looking for the income to be reported.
If you did not constructively receive the income, you can report a second line on your tax return reversing the income and zeroing out the income.
As an example, follow the steps below to report other income.
- Select Federal from the left side menu.
- Click on Wages & Income.
- Scroll down to Less Common Income. Click Show more.
- Click Start / Revisit to the right of Miscellaneous income….
- Click Start / Revisit to the right of Other reportable income.
- At the screen Other Taxable Income enter a description of the income.
- Click Add another income item
- Enter the same income amount as a negative number.
Maintain a record of the transaction should the IRS question the entry at a later time.
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