Essentially, you are required to report all your business income, regardless of how it is reported. Turbotax has a place to enter a 1099-K, and that will trigger various steps in the interview related to hobbies and self-employment. But since since you will already have a schedule C, I would just report your income under schedule C, and ignore the 1099-Ks, and if the IRS sends a letter, you can explain.
The IRS should already be used to people whose schedule C income doesn't add up to the tax forms they get, so I don't think this will cause a problem. The change in the law is more about capturing business activity that went under the radar before.
Educating the client is key ... if they pay you thru a CC (which will issue you a 1099) they do not ALSO need to file a 1099 however if they do (to avoid IRS issues later ) you can report all the income from all the forms (even if it is a duplicate) then simply enter a misc expense to negate the duplicate income reported. Although this is not really the correct way to do this it will keep you from having to deal with an IRS CP2000 later.
Sadly the IRS did not take this situation into consideration in their well intentioned attempt to catch unreported income and now with the new requirement to issue them at only $600 it will cause millions of new taxpayers to deal with the unintentionaled consequense starting in 2022. There needs to be better instructions issued on how to handle this "duplicate income" situation. Until this happens all you can is play defense even it it is not 100% kosher.
If you received an erroneous (or duplicate) 1099, You have several choices:
- Ideally, you get a corrected 1099 from the payer
- Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
- Report the Income on schedule C and take a deduction under other expenses, call it something like "duplicate form 1099-xxx"
- Report the income as misc line 8, Schedule 1 income (enter in TurboTax at the 1099-Misc screen) . Then enter a line 8 deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front. Briefly explain at description.
- Do nothing and hope you can explain it away when & if the IRS contacts you