Late Fee and Pet Fees on a 1099-MISC

[user17711185613]

Hello,

2025 is the first full year I’ve been a landlord, so this is my first time dealing with this situation. I own a single-family home that I rent out, and since I live out of state, I hired a property management company to handle it.

The 1099-MISC issued by the property manager shows:

• Box 1: Rental income (over $600)

• Box 3: $525 for a combination of a late payment fee and a non-refundable pet fee (less than $600)

In TurboTax, I receive the following message:

“Your 1099-MISC has a value in box:
Box 3 – Other Income $525.00
We’ll move this form to the 1099-MISC income section for you.
Once you’ve finished adding your royalty property info, you’ll need to review all 1099-MISC income, as well as anything marked Needs review.”

After answering the questions and indicating that the income relates to Schedule E for the rental property address already entered (with uncommon situations such as farm rental income marked N/A), TurboTax then displays this message at the end:

“Select or enter the line of work that earned this income.
We still need some required info.
We’ll include this income in the Self-Employed section (Schedule C) of your tax return. You can add any other self-employment income not on a 1099-MISC later.”

I’m confused because this is long-term rental income and not an active trade or business like short-term rentals or service-based work. Could you please clarify why TurboTax is directing this to Schedule C instead of Schedule E?

[MaryK4]

TurboTax wants to create a Schedule C for the Box 3 income.  The best way to resolve this is to remove the amount from Box 3 and either add it to the Box 1 amount or add it under Cash, checks, and electronic payments (like Square or PayPal).  All rental income is reported on Schedule E Line 3 so it will get reported correctly.