i received a 1099misc, with line 8 filled in. However, this is actually not taxable, what do i do?

[tdfoss]

the income should be roc, but was reported as income

[DaveF1006]

Yes, it's taxable income and  simply ignoring it will likely trigger an automated underreporting notice (CP2000) later. Here is the best way to handle this while keeping the IRS deliriously happy.

Step 1: Enter the 1099-MISC as "Other Income"

You must enter the form exactly as received to prevent the IRS from flagging your return for a mismatch.

1. Open your return and go to Federal > Wages & Income.
2. Scroll down to Other Common Income and select Start/Revisit next to Income from Form 1099-MISC.
3. Enter the information exactly as it appears on your form (Payer name, ID, and the amount in Box 8).
4. Crucial Step: TurboTax will ask a series of questions to determine if this is "business" income. Answer as follows:

• Describe the reason: Enter "Substitute payment in lieu of dividends."
• Does one of these uncommon situations apply? Select None of these apply.
• Did it involve work like your main job? Select No.
• How often did you get it? Select I got it in 2025 (or the relevant year).
• Did it involve an intent to earn money? Select No.

This ensures the amount lands on Schedule 1, Line 8z, rather than triggering a Schedule C for self-employment tax.

Step 2: Create the Negative Adjustment (The "Offset")

Now you tell TurboTax that this specific amount is a non-taxable Return of Capital.

1. Stay in the Wages & Income section. 
2. Scroll to the very bottom to Less Common Income and select Start/Revisit next to Miscellaneous Income, 1099-A, 1099-C.
3. Select Start/Revisit next to Other reportable income (the last option in the list).
4. When asked "Any Other Taxable Income?" select Yes.
5. Description: Enter "Nontaxable Return of Capital reported on 1099-MISC Box 8".
6. Amount: Enter the amount as a negative number (e.g., -500.00).
7. Click Continue.

As an FYI, since you are treating this as a Return of Capital, you are legally required to reduce your cost basis in the underlying stock by the amount of that payment.

1. If you bought the stock for $1,000 and received $50 in ROC, your new basis is $950.
2. You don't pay tax now, but you will pay more in capital gains (or have a smaller loss) when you eventually sell the shares.