I own a single member LLC which was created for the purpose of owning and managing rental properties. In 2022 I had a tenant who fell behind on their rent. As such, I was able to get them approve for rental assistance thru a Kentucky State agency. The agency paid my LLC 3 months of rent to cover the arrears, plus an additional 3 months of rent payments to cover future rent payments.
My tenant elected to move-out before the 3 months future rent assistance could be use under the lease. I contacted the State agency about this situation and was told I need to give these funds directly to the tenant. Which I did ($4980). Since the State agency is going to send my LLC form 1099 with a total of "ALL" the monies forwarded, what is the procedure required to reduce the gross rental income for the amount given directly to the tenant. Do I send a 1099-misc to my tenant and record this as an expense of Schedule E? Not sure how to handle this situation. Please help.
