Received a 1099-MISC for timber. Need to file under investment income. Won't the IRS still have the 1099-MISC and send me a letter stating I didn't enter the 1099-MISC?

Forum|Forum|7 years ago
June 3, 2019
3 replies
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I'm looking at the info on "income from a timber sale". I received a 1099-Misc which the FAQ says is incorrect. It states I should fill out the forms under investment income. Won't the IRS still have the 1099-MISC and then send me a letter stating I didn't enter the 1099-MISC? How will the IRS know the timber sale is under investment income and to disregard the 1099-MISC? Thanks.

TurboTax Self Employed Online

Best answer by Hal_Al

Yes, your concern is well founded. You essentially got an "erroneous 1099-Misc".

You have several choices:

1. Ideally, you get a corrected 1099-misc from the payer (probably not gonna happen)

2. 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.

3. Report the income as misc line 21 income (enter in TurboTax at the 1099-Misc screen) . Then enter a line 21 deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
- “I’ll choose what I work on” Button
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. I would use "Duplicate income reported on Sch D"

In addition, your would still enter the income at investment income

4. Do nothing and hope you can explain it away when & if the IRS contacts you

Hal_Al

Answer

Level 15

Yes, your concern is well founded. You essentially got an "erroneous 1099-Misc".

You have several choices:

1. Ideally, you get a corrected 1099-misc from the payer (probably not gonna happen)

2. 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.

3. Report the income as misc line 21 income (enter in TurboTax at the 1099-Misc screen) . Then enter a line 21 deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
- “I’ll choose what I work on” Button
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. I would use "Duplicate income reported on Sch D"

In addition, your would still enter the income at investment income

4. Do nothing and hope you can explain it away when & if the IRS contacts you

C

chadbelAuthor

Level 2

Thank you so much for sending this info along. I was trying to create another 1099-MISC and put a negative number in. That wasn't working. I will try your suggestion now.

T

TomK2023

Level 15

If you received money from the sale of timber, you'll probably get a Form 1099-S. Some people will get a 1099-MISC, which is (technically) the wrong reporting form per the IRS.

Regardless of which form you received, timber income is reported in the investment section. Follow these instructions. Don't enter the sale in the 1099-S or 1099-MISC section or you'll go down the wrong path.

On the Choose the type of investment you sold screen, you'll want to select Everything else, located at the bottom of the screen. For your cost basis, most people will enter a 0, but you could enter what you originally paid for the seedlings or saplings.

Tip: TurboTax doesn't support IRS Form T (Timber) but the good news is that you probably don't need this form. According to the IRS, it's only needed "...when a sale or deemed sale under sections 631(a), 631(b), or other exchange has occurred during the tax year." See the IRS instructions for Form T.

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