Broker erroneously reported oil royalties as dividends

[dengold]

My broker has erroneously reported oil royalties from a royalty trust (that belong on Schedule E) as 1099 dividends and won't amend the 1099 Div.  I need to reduce the dividends by the oil royalty amount and show this on my return. How can I handle this in TurboTax?

[PatriciaV]

You have two options:

1. Don't enter Form 1099-DIV but instead report the income as Royalties for Schedule E.

2. Enter Form 1099-DIV and make an adjustment equal to the reported dividends. Then report the income as royalties on Schedule E.

Be sure you have documentation for changing the way the income is reported in case the IRS has questions.

The easiest way to find these sections of TurboTax is to use the Search box at the top right side of the TurboTax header. Click on the magnifying glass, type in "1099-div" or "schedule e", hit Enter, and click on the "jump-to" link to go directly to beginning of this topic.

Or go to My Account >> Tools >> Topic Search. Type in "1099-div" or "schedule e", then click the topic in the list to go directly to the start of this section.

[dengold]

If I reduce the dividends by the royalties so that I can report on Schedule E ", is there a place in TurboTax where I can explain what I did?

[PatriciaV]

Not within the program. You would need to mail the explanation separately or simply retain your documentation in case there are questions later. It's unlikely the adjustment would hold up your return.

[dengold]

To what address would I send the separate explanation?

[DianeW777]

As indicated by @PatriciaV you can simply keep the documentation with your return.  The income is being included with your tax return. It's not going to hold anything up and you can respond if there's ever a question.  

Sending a separate explanation/letter would require the need to include a copy of the 1099-DIV, a document that indicates this is royalties and not dividends, also that the payer refuses to make correction.  Print a copy of your return Form 1040 and Schedules (1,2,3 & E), mark them duplicate but sign it.  Below you can click the link to find the address.

• Where to mail tax returns and documents to the IRS  (Find the address for your state)

@dengold