I received earnest money from failed home contract and received a 1099-NEC from the firm that handled to transaction. How do I report the money on my taxes?
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@KrisD15 is correct - you should have received 1099-MISC for this income. If you can't get that error corrected then you should enter this income as Miscellaneous income. You will still pay taxes on it but you won't owe any self-employment tax.
Scroll down in the 'Wages and Income' section to the very bottom - 'Less Common Income'. The last entry there is for 'Miscellaneous Income'. Click start next to that.
On the next screen scroll to the bottom again and click start next to 'Other Reportable Income'. This section allows you to enter the amount received as well as a typed out name for the money received. In your case make sure that the amount matches the 1099 you received and enter a name like 'Forfeited Earnest Money' or something like that.
1099-NEC is to report Non-Employee Compensation and can only be used to report Self-Employment (Contractor Work) income.
Unless you can link this to a business, it will be difficult to report.
If you are a Real Estate Professional or Builder/Developer, enter as business income.
If this was a personal residence, it should have been reported on Form 1099-MISC.
Form 1099-NEC can trigger Self-Employment (FICA) tax, where Form 1099-MISC reports "Other Income".
You may need to have the firm correct the filing and use Form 1099-MISC.
Can you clarify the details of the failed contract and your role in the transaction?
This was from the sale of my personal residence. The buyer was not able to secure financing and did not notify my realtor in default of the purchase agreement.
@KrisD15 is correct - you should have received 1099-MISC for this income. If you can't get that error corrected then you should enter this income as Miscellaneous income. You will still pay taxes on it but you won't owe any self-employment tax.
Scroll down in the 'Wages and Income' section to the very bottom - 'Less Common Income'. The last entry there is for 'Miscellaneous Income'. Click start next to that.
On the next screen scroll to the bottom again and click start next to 'Other Reportable Income'. This section allows you to enter the amount received as well as a typed out name for the money received. In your case make sure that the amount matches the 1099 you received and enter a name like 'Forfeited Earnest Money' or something like that.
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