1099-MISC Box 3 - other income

[Connie707]

A company damaged my car with their machinery in 2021. They gave me a check for the exact amount it cost to fix my car and rent a vehicle while the car was in the shop. The full amount given to me was $2477.49. The company that caused damages to my car told me I would not have to pay taxes on this money and it would not affect me in adding income to my work income when I filed.

I just received a 1099-MISC with the income in box 3. 

Will this income be added to my total income and will I be taxed for it? Is there a way I can report it and then remove the income so it does not count as income? From my understanding this type of income is not taxable because it was paid to fix the car they damaged, the exact amount so I did not keep any money.

Please help!

[DianeW777 · Accepted solution]

Yes there is a way to report it and then remove it from your income. Since the money received was actually a reimbursement to repair the damage caused, and assuming this amount is not greater than the cost of you actually paid for your your car then it should not be taxed.

When you are signed into your TurboTax Account use the following steps to enter the income:

1. Click on Federal > Wages & Income.
2. Scroll down to the Other Common Income section. 
3. Click on the Start/Revisit box next Form 1099-MISC. 
4. On the screen Did you get a 1099-MISC?  click on the Yes button.
5. On the next screen, Let's get the info from your 1099-MISC, enter the information from the 1099-MISC.

Once you have entered the income you can use the following steps to enter it as a negative figure which will result in zero income being added to your other income.

1. Click on Federal > Wages & Income.
2. Scroll down to Less Common Income section.
3. Click on Start/Revisit box next to Miscellaneous Income.
4. Scroll to Other Reportable Income Click Start/Revisit.
5. Enter Description and negative amount (ex. -500).
6. See the image below for assistance.

[Opus 17]

It is not taxable income unless the payment was more than  the repair cost.  But the IRS will be looking for the 1099 since one was sent.  You can follow the suggested procedure, but keep records of the situation and the repair cost for at least 3 years in case the IRS asks for more information. 

[Connie707]

Thank you, it worked!

[Missgidgett]

My old tenant damaged my apartment and the property management gave me her security deposit (which wasn’t enough to cover damage) and included it on the 1099 misc as other income.   I added but I keep getting stuck when trying to file. It gives me a error that I need to review other income 

[Missgidgett]

The message says

Your Form 1099-MISC from windermere prestige properties shows $1,450 on line 3, but this income is not reported on another form or schedule.

Let's review your entries now so you can tell us where to report this amount on your tax return.

[KrisD15]

In your situation, you would NOT use the steps outlined above since it was income from your renal. 

Enter the 1099-MISC and direct it as rental income to be reported on your schedule E.

Next, enter the amount of the repairs as an expense for the rental on your Schedule E. 

Since you indicate that the repairs were more than the security deposit, the income from the security deposit will be zero'ed out on your Schedule C once the expense for the repair is entered. 

@Missgidgett

[HonoluluBlueFan]

When I entered a negative number then tried to file I got an error saying I can’t have a negative number in other income. 

[MonikaK1]

You can enter a negative number with an entry of an Other Income item - if you are using it to balance a separate entry of a positive number with an item of income reported on a Form 1099 that isn't taxable. Depending on where you entered the negative number, the program may perceive it as an error.

Follow the steps provided by DianeW777 above to make the negative balancing entry once you have entered the income:

1. Click on Federal > Wages & Income.
2. Scroll down to Less Common Income section.
3. Click on Start/Revisit box next to Miscellaneous Income.
4. Scroll to Other Reportable Income Click Start/Revisit.
5. Enter Description and negative amount (ex. -500).