I have seen different answers to this question, the only thing that is consistent is that TurboTax does not seem to know how to handle this right. I believe I have found the solution, but perhaps someone could confirm what I have gleaned from other answers to similar questions?
I have a rental property and my property manager has sent me a 1099-MISC with most of the rental income in box one, but a small amount (less than $2k) in Box 3 as "Other Income." This reflects amounts taken from deposits to pay for damages and cleaning after a tenant has moved out. They say they have always done it this way. They tell me it counts as income, even though the full amount went towards damages and cleaning. In other words, there was no actual income.
TurboTax does not want to calculate this as rental income, and wants to create a new entry in my Schedule C and count this as self-employment income. This creates a tax liability for me!
From what I have read in other answers here on the Intuit site, it looks like I am supposed to deduct the amount received in Box 3 from my rental expenses, and remove the amount from the section for "Self Employment Income." But this has not been clearly stated as such. Can someone confirm this?
Okay everyone, calm down! Let's not get into a brawl about it, especially now that I have a definitive answer.
I finally heard back from my property manager. they had initially insisted that this was the way it was done, but did agree to check with their accountant. Turns out I was right, and to their credit, they acknowledged this and issued me a corrected 1099-MISC. Problem solved!
It turns out that most people in my position use an accountant who doesn't even bother entering the 1099-MISC, and just fills out the correct info on Schedule E. (Or they don't know any better and have been paying taxes they didn't have to.) But if you're using TurboTax, having that amount in Box 3 becomes an issue.
I think that intuit ought to add some more questions into that section, such as, "Does the amount in Box 3 represent income from your rental property, such as monies paid by tenants for utilities, late fees or amounts deducted from deposits to cover damages?" If "Yes", add it into the rents total.
Just a suggestions. In any event, I'll just leave this info here for the next investor who gets an improperly filled-out 1099 from their property manager with the suggestion: Request a corrected 1099-MISC.
Okay everyone, calm down! Let's not get into a brawl about it, especially now that I have a definitive answer.
I finally heard back from my property manager. they had initially insisted that this was the way it was done, but did agree to check with their accountant. Turns out I was right, and to their credit, they acknowledged this and issued me a corrected 1099-MISC. Problem solved!
It turns out that most people in my position use an accountant who doesn't even bother entering the 1099-MISC, and just fills out the correct info on Schedule E. (Or they don't know any better and have been paying taxes they didn't have to.) But if you're using TurboTax, having that amount in Box 3 becomes an issue.
I think that intuit ought to add some more questions into that section, such as, "Does the amount in Box 3 represent income from your rental property, such as monies paid by tenants for utilities, late fees or amounts deducted from deposits to cover damages?" If "Yes", add it into the rents total.
Just a suggestions. In any event, I'll just leave this info here for the next investor who gets an improperly filled-out 1099 from their property manager with the suggestion: Request a corrected 1099-MISC.
Interesting. I have the same situation and the response back from my Management company and their accountant is that this is not Rent, which is box 1, but is other income, that will get offset by the repair expenses incurred. I can see both points of view, however, I should be able in TT to allocate this income against the rental property reconciliation - Schedule E vs Schedule C. How do I do that in Turbo Tax?