On what tax form, and within what version of TurboTax do I report 1099-MISC book royalty income that is inherited? I don't have a business and it's about $600 annually.

[blackrock]

I have been receiving two 1099-MISC for inherited book royalty income from 2 different companies as beneficiary of my late brother's estate since 2011.  Every year, reporting the income is confusing, as I do not have my own business. The amounts for 2017 is $53 on one 1099, and the other $550.   I typically use TT Deluxe version, but would be willing to use Premier or Home and Business the proper form for reporting is not included in Deluxe.  I need to know exactly on what tax form and which TurboTax version I should use to report this income, in order to pay the least tax on the royalty income.  Once again, I am not self-employed and only receive the royalties as part of my inheritance. 

[PatriciaR · Accepted solution]

Please review the following information in regards to your two 1099-Misc forms for royalties inherited from your brother.  You will need TurboTax Premier because a Schedule D is required by the IRS to report your investment income.  When you enter your 1099-MISC, TurboTax asks about this income.  Is it:

Investment income from property you own or

Royalty income from your business, including artist royalties or operating a natural resources business (Schedule C)

The Learn More link in blue in TurboTax Deluxe says the following about whether it is investment income or Royalty from your business etc.

Investment Income includes amounts received from oil, gas or mineral properties when natural resources are extracted from your property. These royalties are based on units, such as barrels, tons, etc., and are paid to you by a person or company that leases the property from you. You may be eligible for a depletion allowance. Royalties from intellectual property (patents, copyrights, trademarks, etc.) are only considered investment property income if you are not in the business of creating such works. For example, you could purchase a copyright or inherit the right to receive royalties from a literary work. In these cases, this income would be investment income. But an author or inventor would not typically treat income from copyrights or patents as investment income. 

Royalty Income from your Business includes royalty payments received by authors, inventors, or artists; natural resource properties that you operate; or freelance or contract work. Choose this for income from oil, gas or mineral properties if you own and operate the property. If you are a self-employed writer, inventor or artist, receiving royalty income from patents, copyrights on literary, musical, artistic works, etc., then you need to report this as Business Income.

Because investment income applies to your situation, TurboTax Deluxe goes on to say:

·         Schedule D is required by the IRS to report your investment income or losses, which is covered by Premier.

·         Premier gives you step–by–step guidance to complete Schedule D to report the sale of any stocks, bonds, and mutual funds.

·         Premier also automatically calculates cost basis to help you make the most of your investment income.

·         TurboTax Deluxe doesn’t cover your tax situation.

The correct version of TurboTax is TurboTax Premier for your situation.