I understood that property damages was not taxable, so do I ignore this 1099-misc?
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Don't ignore it, the IRS gets a copy and they may look for it on your return. Report the 1099, but also negate it with a negative entry.
• Enter the 1099-Misc in the Other Common Income section (Enter “1099misc” in the Search Box and Select “Jump to 1099misc”)
• Indicate that it is a “Reimbursement for Damages”, that it does not involve work like your main job, and that it did not involve an intent to make money, and is not a recurring payment (received in the past or expected in the future).
• The income will be reported on line 21 of your return.
To enter the expense:
• Go to Less Common Income, Miscellaneous Income and Other reportable income (enter “other reportable income” in the Search Box and Select “Jump to other reportable income”)
• Continue to the screen “Other Taxable Income”. Enter the description as “Cost of Damages” and the amount as a negative number. These are NOT wages.
A corresponding negative amount will be entered, and line 21 will be zero. See the attached screenshot example (different descriptions, but still offsetting).
(Thanks Todd Lee)
Don't ignore it, the IRS gets a copy and they may look for it on your return. Report the 1099, but also negate it with a negative entry.
• Enter the 1099-Misc in the Other Common Income section (Enter “1099misc” in the Search Box and Select “Jump to 1099misc”)
• Indicate that it is a “Reimbursement for Damages”, that it does not involve work like your main job, and that it did not involve an intent to make money, and is not a recurring payment (received in the past or expected in the future).
• The income will be reported on line 21 of your return.
To enter the expense:
• Go to Less Common Income, Miscellaneous Income and Other reportable income (enter “other reportable income” in the Search Box and Select “Jump to other reportable income”)
• Continue to the screen “Other Taxable Income”. Enter the description as “Cost of Damages” and the amount as a negative number. These are NOT wages.
A corresponding negative amount will be entered, and line 21 will be zero. See the attached screenshot example (different descriptions, but still offsetting).
(Thanks Todd Lee)
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