PA 1099-MISC income from consignment sale

[Tribute724]

As an individual I received a 1099-MISC from a dealership that sold equipment for me.  The amount showed up as income on my IRS return and PA return.  I was able to offset the income on my federal return by entering a negative amount in the "Other Taxable Income" line on Schedule 1...per comments by a TurboTax expert in the community.  This didn't carry over to my PA return.  I can't figure out where to enter the cost basis for this equipment on the PA return.

[ErnieS0]

Pennsylvania has an odd tax system that uses classes of income. Losses from one class can't be applied against another class on income.

If you income and cost basis are in the same class it should carry over.

I was not able to reproduce what you were saying. I suggest you delete your 1099-MISC and enter the amount in "Other Taxable Income" in the same place you entered your cost basis. TurboTax will tell you not to enter a 1099-MISC there but in this case it's fine.

[Tribute724]

ErnieS0, I deleted my 1099-MISC form from my federal return and entered the amount in "Other taxable Income" with the description including 1099-MISC, the Payer and EIN. So, there are two lines there...one for the 1099-MISC and one for the offsetting cost basis.  This did carry over to my PA.  Won't my missing 1099-MISC form be a red flag?

[ErnieS0]

It should not. A 1099-MISC can end up in multiple places on a tax return so unlike a W-2, so it should not raise a red flag.

You listed the 1099-MISC income on your tax return with a description stating its 1099-MISC income with the payer and EIN. That should show the IRS it's there.

If the IRS does send you a letter (because many IRS letters are computer-generated without a human looking at them) you just have to respond by pointing out it was reported.

[Tribute724]

ErnieS0, one thing I did notice.  Although this method removes the 1099-MISC form from both federal and PA state.  It does not carry forward the Other Taxable Income from the federal to the state.  In fact, if I enter anything in line 22 of the Other Income federal worksheet it carries to the federal Schedule 1 line 8z but nothing gets forwarded to the PA state even if I enter only a positive or only a negative or both. 

[ErnieS0]

If you zeroed out the 1099-MISC on federal then you will not see offsetting entries on your Pennsylvania return.

If your income was more than basis, you should see the amount on the Other Business Income screen. If you change that number (to 1 for example), there will be a new screen where you can write in an explanation. You can do that to show your income and basis.

[Tribute724]

ErnieS0, I'm not a business.  This equipment (a UTV) was for personal use only.  The actual amount invested is more than the amount I received from the consignment sale.  I'm only using the cost basis amount up to the amount received and not claiming a loss.  I noted as much on the supporting details on my federal return.  My question on the red flag is that there is no reference to the 1099-Misc amount or the offsetting cost basis in my PA return.  Won't PA be asking where my 1099-Misc income is?  I thought they get a copy.

[ErnieS0]

If you are not a business add the net amount (one entry) on Any Other Miscellaneous Compensation with a description and amount. the Type of Income will be Other income not listed above.

[Tribute724]

Okay.  This does put the information on my PA return.  Just to recap, I deleted the 1099-MISC on the federal return and entered the 1099-MISC box 3 amount on the Other Income Statement worksheet line 22 Other taxable income along with a separate item on line 22 for the offset cost basis.  On the PA return, the net amount shows up on the Gross Compensation Worksheet page 2...similar to where a 1099-MISC would show up.  Is having the entry different alright between federal and state or should I go back to federal and enter a 1099-MISC with a net amount similar to PA? 

[ErnieS0 · Accepted solution]

Differing entries are fine. Pennsylvania is one of the few states that does not conform with federal law (though it does follow it a lot). That just means stuff gets reported differently on the PA return.

I would keep federal the way you have it. Your probably more likely to have your return looked at by the feds than PA.