1099-MISC Box 3, Not Self Employed

[LeadRealty0308]

I received rental income for an investment property that I report on my schedule E; however, since the payer did not report it in Box #1 Rents in the 1099-MISC that I received, the software is treating it as self employed income since they marked it as Box #3 Other income.  This was received due to the fact that my tenant stopped paying rent and the city of Los Angeles stepped in and covered their rent.  They refuse to correct the 1099 to Box 1, even though, going forward the state of California is covering this and has provided the same 10990-Misc for future months and has marked box #1 rent. 

Los Angeles is refusing to comply with how California does it so the rent LA provided was for Jan-Aug; however, the rent provided by CA was from Sept-Dec.  I want to know if there is a proper way I can list Jan-Aug rent marked as "Other Income" but not get dinged as self employed income.  I can't carry it over into my schedule E since it's not marked as Box 1, Rent

[PattiF]

Do not enter Form 1099-MISC at all, just report the total amount as rental income.  The IRS is more concerned that all of your income be reported versus having it entered on Form 1099-MISC.  

[LeadRealty0308]

Thank you for your reply but wouldn't that automatically trigger an audit since they will have a 1099-Misc on their end that won't show a matching one reported on mine?  I've actually had an accountant tell me they had a year long audit fight by ignoring the 1099-Misc and reporting it as rental income.

I don't want to unnecessarily get triggered into their database.  Rather, shouldn't I report it as 1099Misc; however, mark that it's an "uncommon situation" - None of these apply, mark that it didn't involve work, I only got it for 2021 and I didn't involve an intent to earn money?

[JillS56]

The 1099-MISC is no longer used to report non-employee wages/income.  There is a new form that reports what use to be reported in Box 7 of the 1099-MISC.   Take another look at your return, Box 3 of the 1099-MISC would not be treating the income as self-employment.   Self-employment income or non-employee income is now reported on the new form 1099-NEC.   

If it is calculating self-employment then try deleting the 1099-MISC and re-enter it.    Box 3 of 1099-MISC income should end up on Schedule 1, Line 8z Other Income.   

[LeadRealty0308]

Hi there, that didn't seem to do the trick; however, if 1099-Misc Box #3 belongs in Schedule 1 section 8Z, the only way I am able to accomplish that is to - mark that it's an "uncommon situation" - None of these apply, mark that it didn't involve work, I only got it for 2021 and I didn't involve an intent to earn money.  Is it ok if I do it that way?  

[ColeenD3]

Under Wages and Income, scroll down to Income from 1099-MISC.

• Enter the 1099-MISC exactly as printed, and then Continue.
• Describe the reason for this 1099-MISC: RENT
• Select None of these apply, then Continue.
• Select No, it didn’t involve work….. and Continue.
• Select No, it didn’t involve an intent to earn money, then Continue.
• Do you have another 1099-MISC? Select YES and then enter another negative entry saying it was misreported rent. Then enter your rent, reported on Form 1099-MISC, as rental income.

[LeadRealty0308]

Thank you for your reply.  When I put a negative entry on the second 1099, it does not change my taxes owed.  As if it doesn't even recognize the negative number.  I assume it's because it's highly unlikely to get a negative number reported in box 3 of your 1099? 

Also, even if we figure out a way to make it recognize the negative entry, wont that automatically create an audit as their system will recognize a mismatch of 1099s due to the second 1099 being reported as a negative entry; however, their system will only show one 1099 as a positive entry?

[LeadRealty0308]

Here is a thought?  What if I report the 1099-Misc and have the system generate the Self Employed Income Schedule C.  Then, go into Sch C "Other Expenses" and report the same amount as an expense and manually write next to it, "Transfer to Sch E as Rental Income".  Then, go to Sch E Rental income and increase the gross rents to reflect the 1099 portion that was reported as Box 3?

[Rick19744]

I tend to agree with @PattiF 

Just enter the amount on your Sch E as a separate amount.

Should you receive a notice or letter regarding this, simply reply that it was for rent and it was properly reported on your Schedule E; at this point make a copy of the detail to support that it was entered. 

Then explain that the issuer of the 1099 did not complete the 1099 properly and you could not get them to issue a corrected form.