1099 MISC issued to renter instead of the business owner, now I am being forced to pay their taxes.

[MaryTL]

Hello Turbo Tax Community,

I am searching for an answer regarding a 1099 MISC and Schedule E.

Please allow me to provide a description of the situation.

My parents home was destroyed during Hurricane Michael and I had to rent a home for them while repairs are made.

The “temporary housing agency” which was brought in by the insurance company required that I complete a W-9 instead of the business that owns the property that we are renting.

Moreover, they insisted that I receive the rental payments and forward them directly to the owner/landlord, which I did.

I now know that I should not have been asked to complete the W-9 but at the time I had no idea what I was being asked to do in the midst of trying to get my parents settled.

Because of this W-9 I received a 1099-MISC which states that I (the renter) made $4200 in rent, which I did not.

I contacted the temporary housing agency and asked if they could correct this matter, retract the W-9 and issue it to the company who owns the home.

The temporary housing agent stated that they would not correct the form that that I should “ complete a Schedule E and somehow reverse the income as a loss”.

I am at a complete loss as what to do, I have reviewed the Schedule E and it frightens me terribly.

I would be required to state that I own the rental home among a litany of other questions pertaining to fair market rent, carry overs, and rental types. All questions that I have no answer to.

I fear that if I proceed to file my taxes with a Schedule E I will be audited.

Can anyone advise if the temporary agency should correct the W-9?

If the answer is no, should I file a Schedule E and how would I reverse this income as a loss.

Thank you all for your time and assistance.

[PaulaM · Accepted solution]

Report it as Misc Income in the Less Common Income section for the $4,200. Then make a second entry in the same section for a -$4,200. That way you are disclosing to the IRS the form 1099-MISC, but the net effect will be zero for you. Keep good records of the events you described.

[MaryTL · Accepted solution]

Thank you Paula! I will follow your instructions.

[PaulaM]

You are welcome! 🙂

[ESXJACK]

I was forced into a similar situation, but I took my parents into my home.

I had to pay increases in food, energy, furniture, clothing, and even most medications.  I even had to renovate parts of the house as my mother was being treated for cancer and could not get around very well.

How can I capture these expenses to offset the taxes on the temporary housing given to me?

[GeorgeM777]

The renovations become part of your basis in the home.  Thus, it does not appear that you would be able to deduct the renovation expenses.  Because you took care of your parents, you may qualify as Head of Household.  The HoH filing status has a greater standard deduction that single or married filing separately.   Here are the requirements for Head of Household:

Head of Household

You may be able to file as head of household if you meet all the following requirements.

You are unmarried or considered unmarried on the last day of the year. 

You paid more than half the cost of keeping up a home for the year.

A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, your dependent parent doesn't have to live with you. 

Here is a link to a TurboTax article that explains the Head of Household filing status.

A Guide to Filing Taxes as Head of Household

@ESXJACK 

[ESXJACK]

I already have HoH due to my 9 year old son.  What other scenarios are there?

[PattiF]

You may be able to claim your parents as dependents. There is a $500 Credit for Other Dependents that you may be able to claim.

Please see this TurboTax Help article for more information about this credit.

[ESXJACK]

This doesn't seem to reduce the taxes by much.  I can't use as a business income with a schedule E to capture the deductions?  Is that an option?

[MarilynG1]

You could use Schedule E to report 'renting out part of your home'.  You could claim expenses, but not over the amount of Rental Income.  You would not claim your parents as Dependents in this case.  If the amount of Rental Income you received is based on a Fair Market Rental Cost, here's more info on Renting to Family Members.

Here's more info on Renting out Part of Your Home. 

@ESXJACK 

[ESXJACK]

I live with my partner whose name is on the house.

Will this be a problem for schedule E?

[ESXJACK]

To be clear, my name is not on the house.

[MarilynG1]

If you are not the owner of the property, you can't claim Rental Income/Expenses.  Basically, per the IRS, if you received income, and you used it, you pay tax on it. 

@ESXJACK 

[ESXJACK]

I gave my parents the money since it was for them.  I asked the company to send a corrected 1099-misc to my dad instead of me.  Hopefully this will help correct it.  Thanks for all the advice 

[Anny P]

I can’t find the way to report this 1099-MISC if I’m not the owner of a property. I received a rental relief. Need help ASAP