Full 1099-K, but we only are 1/3 owners

[jjm_3]

We own 1/3 of a recently inherited property that is a vacation rental.  We received a 1099-K for the full amount of the rental receipts in 2021.  The 1099-K for 100% of the rental income is in my wife's SSN#.  However, the ownership is split 3 ways between my wife and her 2 brothers.  All this info was entered into Turbotax, and Turbotax was able to correctly calculate 1/3 of the rental income and all deductions and depreciation correctly.  However, my concern is how will the IRS know that we are only liable for 1/3?  I was hoping turbotax would create a schedule showing the full amount of the 1099-K, the amount allocated to other owners, and the amount applicable to us. But I don't see a way for turbotax to do this. A CPA friend had indicated that's what he has done for clients before. Suggestions?

[PattiF · Accepted solution]

You would send forms to the IRS that indicate who received the money that was in your wife's SSN. These are call Nominee Actions. 

Nominee Actions/Returns:

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099-K with Form 1096 (this is a transmittal for the 1099-K) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099-K, list yourself or the original Payee as the payer and the other owner, as the recipient. On Form 1096, list yourself or the original Payee as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099-K to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here: 

• Form 1096-Transmittal 
• Form 1099-K

Split the amount as needed and enter only the necessary portions on the appropriate returns.

[jjm_3]

Thanks.  That's helpful and good to know.  

A few  comments/feedback about turbotax

- I entered all this info in turbotax including that we had a full 1099-K, but only 1/3 owner etc.  Turbotax took the numbers and did a great job of all the calculations, but failed to prompt me to do the nominee action, or even inquire about it.  Surprising since turbotax diligently prompts me and asks if I need to issue a 1099 on various other occasions.  

- Turbo tax lists all my 1099's from various sources (eg consulting income, investment income, investment property income etc), but fails to list my 1099-K even though I told turbotax I had a 1099-K.

Turbotax didn't make this easy and didn't spell it out for the user like it typically does on most other items.  Perhaps turbotax handles it this way because 1099-K's are IRS information returns.  

[jjm_3]

Also, how do I report this on schedule E.  Do I report the1099-K gross amount on line 3 of Schedule E and report the 2/3 nominee income as a deduction on line 19 of Schedule E?  Thanks for your help.  

[PattiF · Accepted solution]

Yes, that is how this is handled in your tax return. Enter the two-thirds of the 1099-K as Other Expense.

[jjm_3]

Patti, thanks for your help!  You've been very helpful.