How do I create a negative amount in TT home and business on my 1040 to offset 1099-MISC earnings erroneously report to my SSN? Earnings have been reported on my LLC's 1065..

[theunbelievable]

And where can I make a note explaining this to the IRS, or will I need to file by mail and enclose a letter?

[JamesG1 · Accepted solution]

Has the IRS form 1099-MISC income been reported to Other Income on the IRS form 1040 income tax return?  

Or reported on the LLC 1065?  If the income is reported on the IRS form 1065, could not a miscellaneous expense reverse out the incorrect income?

In TurboTax Desktop H & B, post the negative entry as follows:

• Across the top of the screen, select Personal.
• Across the top of the screen, select Personal Income.
• Select I'll choose what I work on.
• Scroll down to Less Common Income.
• To the right of Miscellaneous Income, 1099-A, 1099-C, click the Start/Update button.
• To the right of Other reportable income, click the Start/Update button.
• At the screen Other Taxable Income, enter a description such as “Income in error” and a negative amount.
• Click Continue. 

The entry will be reported:

• on line 8z of Schedule 1 of the Federal 1040 tax return, and 
• on line 8 of the Federal 1040 tax return.

Make the description as explanatory as space will allow.  If you electronically file, there is not an ability to enclose a letter.

If you file by US Mail, you may enclose a letter of explanation.

In any case, make sure that you keep records of all transactions. Later, you may need to demonstrate to the IRS that this is not taxable income.

[theunbelievable]

The income is being reported as 1099-MISC on my 1040 since it was reported that way to my SSN, and I will attempt to do what you advise to create a negative entry and explain why. I also reported the income on my LLC's 1065, but did not as a 1099, just as Other Income.

[theunbelievable]

Thanks so much!