My tax conundrum

[Mickey1425]

I live in Western Colorado.  My parents live in Price, Utah.  Several  years ago, my sister came to Price and began living with my parents.  A few years later she began collecting a monthly dispensation from the state of Utah because she was deemed “unemployable”.  My parents bought a small house for her to live in, for which they pay a monthly mortgage.    Housing Authority of Carbon County, Utah pays my parents a monthly allowance to cover my sister’s rent for the house.  The allowance is enough to cover the mortgage payment and some amount for repairs and maintenance on the house.   My father passed away a few years ago and my mother worried that if she were to pass, the monthly allowance from Carbon County would disappear.  For this reason she wanted to have the allowance assigned to me instead of her.  She explained in detail to the Carbon County Housing Authority representative her concerns and they assigned the allowance to me.  I am at a loss as to how to properly report all this.  The house and mortgage are in my parents name and the allowance is reported as rental income to me on a 1099-misc.  I set up a savings account for this money and the mortgage is set up for auto-pay from this account.  How can I report the mortgage payment to offset the income from Carbon County?  Or how do I report it without having to tie it to the property owned by my mother?

[RobertG]

Your mother should be reporting the rental income and expenses. 

She owns the property and is liable for the mortgage and taxes.  

You are just a nominee.  But since you have the 1099 in your name, you need to report it.

I suggest that you report the 1099 as rent on the property, but claim a deduction of an equal amount.  Describe the deduction as 'Nominee Income'.

Your mother would then report the rental as she has in the past.

[Mickey1425]

Thanks for the reply, I had never heard of "nominee income".   My next question is how do I enter this in turbotax.  There seems to be no path for it at the 1099 misc screen.  I have found other solutions applying to 1099-int and 1099-misc. but not specifically to a 1099-misc with the income reported in box 1 (rents).  My software is turbo tax deluxe; do I need to upgrade?  

[DianeC958]

Since the income is reported on a 1099-Misc, you need to report the income in your tax return as Rental Income.  Go to

Wages & Income

Rentals, Royalties, and Farm

Rental Properties and Royalties (Sch E)

Then enter the full amount as an expense as the Nominee Income, add the description that the income is being claimed on your mother's tax return.  (Use her name).

You will need to upgrade to the Premiere Version of TurboTax.

@Mickey1425

[Mickey1425]

I have the 1099-misc reported as rental income.  When I go to schedule E, the program automatically assigns me as owner of the related property (which I don't own) in a later screen, I enter my percentage of ownership as 0.00 %.   In what part of the expense section of schedule E do I enter the Nominee Income expense?

[AmyC]

I am leaning towards marking the income as nominee. Assign it to your mom since she has the house and expenses to go against it. That makes the most sense.

There is not a good method. Two steps, one to enter the income and the other to mark nominee.  I suggest:

Enter the income:

1. Income and Expenses
2. Other Common Income
3. Form 1099-MISC, start
4. screen Who paid you/ Let's get the info
5. enter the 1099-MISC information
6. Source of the 1099-MISC
7. select bottom Nonbusiness income from rental of personal property or equipment
8. continue
9. Do you have another 1099-MISC, no

Now to make it nominee:

1. Back to federal income
2. scroll to bottom Miscellaneous income, start
3. scroll to bottom other reportable income, start
4. Other Taxable Income
5. Enter nominee 1099, your mother's name and social security number
6. Enter the 1099 amount as a NEGATIVE $$$

[Carl]

Wow! You have a mess when it comes to taxes.

Your mother owns the property and your mother "not you" is renting it out to her daughter. Rent is paid by a third party and reported to the landlord as rental income on a 1099-MISC. The only problem is, is that "you" are not the landlord.

The reason this is a problem for you is because you are  required to depreciate rental property. But "you" can't depreciate that which "you" do not own. With the amount being reported to you in box 1 of the 1099-MISC, makes it rather difficult (if not impossible) to correctly report this as nominee income.

Add to that, if your state taxes personal income, (and Utah does tax personal income) then your issues have just been doubled. It is my suggesting that you STOP seeking assistance in this public user-to-user forum and seek the services of a qualified, certified and licensed tax professional in the state of Utah.  If a tax pro screws things up, then you have someone that you can hold legally liable. You do NOT have that protection in this public user-to-user forum. So please seek professional help yesterday, if not sooner on this.

If you use TTX and report this as nominee income, since it's difficult if not impossible to get that across with the income reported in box 1 of the 1099-MISC, you're practically begging the IRS to audit you. A tax pro will have access to forms and worksheets that are not included in any version of the TurboTax program, and with that they can not only report things correctly, but also significantly reduce your chances of being audited on this 24-36 months down the road after you file. But if you are audited, then you'll have a tax pro to help you with explaining things to the IRS.

[fanfare]

How to nominee the 1099 back to your mom.

"Nominee/middleman returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners showing the amounts allocable to each. You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 with the Internal Revenue Service Center for your area. On each new Form 1099, list yourself as the “payer” and the other owner as the “recipient.” On Form 1096, list yourself as the “Filer.”

If you do that the income is out of your hands and is just 'zero-d out" on your return.