1099-NEC cash back from realtor (buyers agent)

[Murali_G]

I have received a 1099-NEC for the cash back given by buyer agent for the house we bought. I was trying to update this info during filing using Turbo Tax, but its creating an entry under Business Items, specifically "Business Income and Expenses (Sch C) with a business name.  I'm not self-employed and I don't have my own business. can you please help me on how to proceed.  

[ColeenD3 · Accepted solution]

This income was misreported. It should have been issued on a 1099-MISC. 1099-NEC is solely for reporting self-employment income.

Ask for a corrected form from the buyer's agent.

[hanhrockville]

Use your social security number if you don't have a business number.

[Hal_Al · Accepted solution]

As I understand it, you bought a house and the agent "kicked back" part of his commission to you, essentially resulting in a lower price on the house.

 Unfortunately, the commission was still income to the agent and to justify his deduction, he sent you a 1099-NEC. 

You do not have any income to report.  You just adjust the cost basis in your home, by the amount of the rebate. Unfortunately, you have to deal with an erroneous 1099. 

If you received an erroneous 1099-NEC, you have several choices:

1. Ideally, you get a corrected 1099-NEC from the payer
2. 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.
3. Report the income as misc line 8z, Schedule 1 income (enter in TurboTax at the 1099-NEC screen and identify it as sporadic income). 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-NEC"
4. Do nothing and hope you can explain it away when & if the IRS contacts you