1099-K form from from Airbnb

[alex7003]

Hi, I received a 1099-K from Airbnb, but the reported amounts reflect the total collected by Airbnb, not my actual payout. Should I adjust it to reflect my actual earnings, or keep it as-is? Also, after entering the form into TurboTax, my net return increased by approximately 20% of the amount reported. How is that possible? Since it’s income, shouldn’t it decrease my return instead of increasing it?

[DianeW777 · Accepted solution]

It depends.  If you are referring to a higher refund, then there could be many reasons for that.  The facts and circumstances on your return make the difference and no two tax returns are alike.  However, if you have dependent children the income level can make a difference when the earned income tax credit (EITC) comes into the picture.  Or if the child tax credit (CTC) is being used for children under 17 years of age.

Also, if you rented a portion of your personal residence and you had expenses it's very important to answer the appropriate questions when you enter your rental property.  Another question is whether this is considered short term rentals, with substantial services which would make the income subject to self employment rules.

• Should I report my rental on Schedule C or Schedule E?
  • Schedule E allows passive activity losses against other income if you meet the income levels. Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.
  • Schedule C, if there is a profit, would require self employment tax in any profit year or years.

Report the full amount and if some of the income reported is an expense to you then you should deduct those expenses.

[heimanjj]

Additionally, Airbnb reports any cancelled or refunded bookings as income on the 1099k. A bit confusing how to note this on Sched. E. Should it be expensed under Misc Expenses with a descriptor of "Cancellations/Refunds"? Thats also where I plan on putting the 3% service fee expense. 

To get a better idea of what is going on... 

If someone books and then cancels before arrival, the full amount you would have received for that reservation is still reported as income on the 1099k regardless of cancellation fees policy. I'm assuming this is because Airbnb collects that payment at the time of booking, and conveniently gets to let it sit on their books. When its cancelled they have to account for that and just pass it on to us. 

[JamesG1]

So if you have two Airbnb bookings for $1,000 each and one cancels, you receive an IRS form 1099-K for $2,000 in box 1a.

One of the $1,000 bookings was refunded by Airbnb yet the income is passed on through the IRS form 1099-K.

You are correct.  The amount passed on as income which you did not receive should be expensed within the Schedule E rental activity to make you whole.

As you described, use a specific expense classification and maintain a record of the transaction within your tax return papers should a tax authority question the entry at a later time.

@heimanjj