they split out the utility income into Box 3. The utility income is reimbursement for utilities I pay on behalf of the tenant.
Bottom line... the management company is flat out wrong. Period. End of Story. All monies received by a rental property owner that relates the rental *for any reason* is rental income. In many cases this would even include a property insurance payout.
I’m unsure what the difference is, between the initial entering of Box 3
Box 3 of the 1099-MISC is for *EARNED* income. In order to have earned income, you (or someone you hire to do it on your behalf) has to go out and actually *do* something to earn it. You did absolutely nothing what-so-ever to "earn" it, nor did you pay anyone to do anything for you to earn it. In addition to the money in box 3 being taxable income, it's also subject to the *additional* 15.3% self-employment tax.
Rental income is reported in box 1. You don't lift a finger to "earn" it. All you do is "sit there" and collect it each pay period. While rental income is subject to "normal" taxes, it is not subject to (and should not be) the additional 15.3% self-employment tax.
they say that this is correct, "per the new form".
What "new" form? There's nothing new about the 2020 form 1099-MISC. In fact, it's "exactly" the same as the 2019 form 1099-MISC. So ask them what "new" form they are referring to. If they start talking about the 1099-NEC (which *is* a new form) that NEC is only for "earned" income and is not used for reporting rental or any other passive type of income. Therefore it flat out does not apply to this situation, since they did not have any need or reason to report anything to you on the 1099-NEC. (They're just trying to make you go away.)
If anything, use my four favorite words.... *show* *me* *in* *writing* where it says box 3 is correct, and show it to me on an official document on the irs.gov website. (Just because the cornell.edu website says it's correct, means nothing. Cornell University is "NOT" a taxing authority and they don't pass, write or make tax law at any level of government.
Basically, report it all as rental income. But make sure you keep all of your paperwork and correspondence on this. If (when) the IRS questions you on this a few years down the road (if you get pulled for a random audit) there's no way you're going to remember all the details from 2-3 years prior. So documentation will be your life saver, and your property manager's nightmare.
