How do I report 1099-G income related to my Schedule C business?

[dbookbinder]

I was awarded a grant from the State of Massachusetts and received a 1099-G from them. The grant was a "cultural sector recovery grant" for artists, and I have a Schedule C arts-related business. TurboTax asks about 1099-G government grants in the Personal Income section. Do I report this grant there, even though it's related to my Schedule C business, or on my Schedule C form?

I can see  how to report my 1099s in Schedule C, but not how to report this grant, though it may be more beneficial to me to report it there, as I applied the grant to business expenses, as is intended by the state.

[PaulaM]

Enter it under 'Other Income' under your Schedule C. Enter a description, then enter the box total amount. This keeps the grant with your business income. 

[dbookbinder]

Okay, thank you. That was what made sense to me, but I was thrown off by the inclusion of the 1099-G prompt for government grants in the Personal Income section. It would be nice if there was a note on that page that said what you said here. Is there a way to pass that suggestion on to the development team?

[dbookbinder]

Still a little confused by TurboTax's language. When I go to add the grant to my Schedule C business income, under other income, I see the prompt:

If you have Income from sales or services at was not reported on forms 1099-MISC, 1099-NEC, or 1099-G, enter it below.

Just trying to make sure I don't get a letter some day saying "You didn't report that 1099-G grant in 2023" and wanting to tax me twice, plus penalties, on the amount.

Thanks again.

[dbookbinder]

After doing additional research, I'm finding evidence to indicate that I should not report the grant as Schedule C income because I did not perform a service or supply a product in order to get it. It is not earned income, and therefore should not be subject to self-employment tax, as far as I can tell. Can someone verify this?  

[dbookbinder]

After some discussion with the provider of the grant, I'm not confident your answer is correct, since the grant is not earned income but rather is given with no service or goods received from me.

[PaulaM]

These funds were received by your business and not you personally.

The 1099-G income belongs on the Schedule C as other income (not general income where you saw those prompts) and IS subject to self-employment taxes. The unrestricted use of these funds means that if used properly you would also have corresponding expenses spent from these funds. 

Therefore, the recording of the 1099-G in its proper Other Income category, satisfies the reporting to the IRS on the 1099-G form, and the reporting of expenditures with grant funds in the expense section will negate any self-employment taxes on this income. You will have a wash in other words.

What would be wrong is to report fund expenditures as expenses, and thus lower your self-employment taxes falsely without the corresponding grant income. @dbookbinder 

[dbookbinder]

Okay, thanks.