Brokerage Sign-up bonus - 1099 MISC

[bechicago90]

I received a $600 bonus for opening a Merrill Edge brokerage account.  I try to report this as income based on Turbo Tax prompts but I get stuck as it's asking for me to enter the "principal business code".  None of them apply.  Turbo Tax thinks I own the business that paid me the $600.  So complicated.  I'm just trying to properly report the $600 bonus but can't figure how.  Any advise or suggestions would be appreciated. Thanks

[JohnB5677]

I suggest you try to enter it a different way.  Clear what you have.

Log into your return:

1. Go to Wages & Income.
2. Scroll to Less Common Income.
3. From the drop-down select Miscellaneous Income [Select / Revisit].
4. Choose Other reportable income.
5. Follow the Interview.
   1. You did not have an intention to earn money!
   2. That would have been an ongoing job.

If I've misunderstood your question, and this does not completely answer it, please contact us again and provide some additional details.

[Opus 17]

You're in the section for self-employed business, that's not correct and will result in you paying too much tax.  This is not business income.  Enter as miscellaneous other income, if you are asked questions about business purpose, answer no (not part of a business, not intended to make a profit, etc.).  

Alternatively, you could enter it as bank interest not reported on a 1099-INT.

[bechicago90]

Thx for your suggestion.  I tried it.  The Turbo Tax prompts/info are not intuitive with this route.  Since I received a 1099-MISC, TT thinks I received business income.  I would need to answer a question or two inaccurately.  I don't remember with certainty but I think one question was "Did I receive a 1099-MISC?"    The "work around" is to answer that I didn't receive a 1099-MISC.  But I did.  So, thanks for your help but I think TT needs to modify the software to account for income that is received from banking & brokerage account set-up cash incentives.

[GeorgeM777]

Your bonus payment can be reported as other income.  If you have already entered this income on your return, you can disregard what follows.  However, if you still need to enter this income, you have two options.  Here are the steps to enter the 1099-MISC as other income:

1. To enter other income in TurboTax online, click on Wages & Income, 
2. scroll down the page to Less common income, click on the drop-down arrow and select Miscellaneous Income.  
3. From the list select Other reportable income and respond to the questions on the screens that follow. 
4. On the screen, Other Taxable Income, you may see information indicating that you should not report your 1099-MISC in this section.  Just ignore that statement and enter your information.  

If you are using TurboTax CD/download, the process is similar.  After selecting the Personal tab, and the Personal Income tab, scroll down the screen to Less Common Income, and select Miscellaneous Income.  Enter your information. 

There is another section of TurboTax that directly relates to 1099-MISC.  This section is Other Common Income.  Please note that when working through the Other Common Income section, you will see a screen asking whether your 1099 represents an intent to earn income/money, and while it may seem counterintuitive to select No, that is the response you need to select.  If you select Yes, TurboTax will report this income as self-employment income, and you will be back in the tax position you want to avoid.  Thus, select No, and continue through the application.

Both of the processes mentioned herein will produce the same result.  However, there are fewer screens to address if you decide to enter your 1099-MISC income as miscellaneous income.  

@bechicago90 

[Opus 17]

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@bechicago90 wrote:

Thx for your suggestion.  I tried it.  The Turbo Tax prompts/info are not intuitive with this route.  Since I received a 1099-MISC, TT thinks I received business income.  I would need to answer a question or two inaccurately.  I don't remember with certainty but I think one question was "Did I receive a 1099-MISC?"    The "work around" is to answer that I didn't receive a 1099-MISC.  But I did.  So, thanks for your help but I think TT needs to modify the software to account for income that is received from banking & brokerage account set-up cash incentives.

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The questions in the 1099-MISC interview are taken directly from IRS instructions and guidance.  The IRS is very focused on making sure that self-employment income is reported correctly so there is a bias in that direction.  The key question is probably "intent to earn money."  What trips people up is that the IRS has a very specific definition of "earned" income -- that is compensation for performing work, or a service, or providing goods.  While you certainly have an intent to make a profit when investing, that is not considered "earned" for the purpose of this question.  You didn;t perform work to get this incentive payment.