Can i add a statement to my tax return explaining why the income reported on a 1099misc is not taxable and still be able to e-file?

[bmerles]

Can I add a statement showing the 1099 and then explaining:

The income reported on this 1099 is for 3 days rental of a vacation time-share and is therefore not reportable per Code Section 280A(g)(2).

and still be able to e-file, or will I have to mail the 1040.

[AnthonyC · Accepted solution]

You won't be able to add such a statement and e-file through TurboTax.  So, you will have to mail your forms if you wish to include a statement.

An alternative option would be to report the 1099-MISC and then use Line 21 of Form 1040 to report a corresponding negative amount of income for the same amount as the 1099-MISC with the description of "Not taxable income per Section 280A(g)(2)."  This way you are reporting the 1099-MISC on your return since it was received, but accounting for the fact it should not be taxable income.  You would then keep your records and if the IRS were to question the treatment, you would respond to their notice with the statement you would have included now.

To enter this negative income amount on Line 21 -

• Click on Federal Taxes (may say Personal if using Self Employed or Home and Business)
• Select Wages and Income 
• When the page opens, click "Jump to full list” if it is not displaying the full list of income items.
• Scroll down to the very last item, Less Common Income and click “Show More” to expand the list
• Select "Miscellaneous Income, 1099-A, 1099-C”
• Select “Other Reportable Income” - the very last item (There is another “other” category that is the first choice - do not use that one)
• Enter the negative income amount and the description and this will place the income on Line 21 of Form 1040 

[bmerles]

Actually, if I put the 1099 information on line 1 of the above and the non-taxable information on line 2, Turbo Tax will create the statement I inquired about. Thanks.