As others have said, you report this as a sale of an investment at Federal>>Income & Expenses>>Stocks, Mutual Funds, Bonds, Other.
Your problem is that you have an erroneous 1099-Misc that the IRS gets a copy of and will expect it to show up on your return (regardless of which box [it's usually box 3] it shows up in).
If you received an erroneous 1099-Misc, you have several choices:
- Ideally, you get a corrected 1099-misc from the payer (not likely in your case)
- Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly. The explanation should include that fact that it's reported on schedule 8949 investment sales, on your tax return.
- Report the income as other income on line 8 Schedule 1 (enter in TurboTax at the 1099-Misc screen) . Then enter a line 8 deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Enter the number with a minus sign (-) in front. Briefly explain at description.
- Do nothing and hope you can explain it away when & if the IRS contacts you
