Q. I was reading this article. Would this work? (Entering an offsetting negative amount).
A. Yes if you believe the amount is not taxable and have received what amounts to an erroneous 1099-Misc, entering the 1099-Misc and then entering an equal negative amount is one way to handle it. This method is frequently recommended in this forum). See update below (choice #3).
The article you posted is quite old. The positive and negative amounts are now entered on line 8z of Schedule 1, rather than line 21 of form 1040.
But that's only HOW you enter it, if it's not taxable There's still the bigger question: is it taxable or not? I think it is taxable, but others may disagree.
If you received an erroneous 1099-Misc, you have several choices:
- Ideally, you get a corrected 1099-misc 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 as misc line 8z, Schedule 1 income (enter in TurboTax at the 1099-MISC screen). Then enter a line 8z 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. Call it something like "erroneous 1099 received"
- Do nothing and hope you can explain it away when & if the IRS contacts you
