In general, you should report the income from Form 1099-K as it appears. Then add a business expense for the 1099-MISC amounts you reported to your clients under Miscellaneous Expenses (ex: "Collected Rent Reported to Clients").
Your other option is to report the 1099-K was incorrect and enter an adjustment for the 1099-MISCs that you sent. Note that this flags the 1099-K on Schedule 1 for further IRS review.
- If you choose this option, check the box under Box 1a "This amount is too high..."
- Enter the amount to be adjusted in the box that appears as a positive number.
- Although the 1099-K summary page will show the gross amount, the net amount will flow to your Schedule C.
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