How to report 1099-MISC income for a bonus I received for transferring money from one investment company to another

[czhike88]

Last year I received a payment for transferring my accounts from one investment company to another.  When I did an import from the investment company into Turbotax Premier, the payment showed up in the 1099-MISC Summary under Wages&Income.  Turbotax asked the reason for the 1099-MISC and I wrote in the transfer bonus as the reason.  In a later pages: I answered No, it didn't involve work.  Only received it in 2024. Yes, involved an intent to earn money.  After that, Turbotax is saying I can deduct expenses for the bonus ?????  Next, it asked me confirm the reason which I did.  I answered the rest of the questions. with no.  After I press the Done button, the payment shows up as Business Income ????? Later when I run Smart Check, I get several errors involving Schedule C (Profit or Loss from Business) for which I am at not sure how to answer. I am retired and never had my own business, so don't know why Turbotax is doing this.  Please advise.

[SharonD007]

Income from Form 1099-MISC can be considered Other Income instead of Self-Employment Income and be reported on Line 8 of Schedule 1of your 1040. You must answer NO, to the question Involved an intent to earn money  in order for the income to get reported as Other Income and not Self-Employment Income.

Go back to Wages & Income and edit the 1099-MISC. Go through the screens again making sure you answer NO it didn't involve an intent to earn money.

For additional information, review the TurboTax articles What's the difference between self-employment income and other income? and Where do I enter a 1099-MISC?

[czhike84]

Thank you. Per another post I found, I deleted the imported 1099MISC data and added it manually and then answered NO to the intent to earn money question.  No errors now.

[askingaquestion]

what about the ACAT BONUS CLAWBACK?  does that tie in?  do you have to report that some how?  and another answer said to report it as "no this was not an intent to earn money" and didnt say anything about calling it a manufacturer incentive.  since there are different answers, what happens if you choose one over the other?

[DianeW777]

This is not self employment income. The key is that you do not want to report it as self employment income or pay self employment tax, which is the reason for the questions below. Answer them as indicated below when entering your ACAT (automated customer account transfer) bonus clawback.

1. Answer None of these apply on the screen Does one of these uncommon situations apply?
2. Answer No, it didn't involve work like my main job for the question Did this involve work that's like my main job?

@askingaquestion 

[askingaquestion]

Where do you report the clawback?  Mine was a negative number and I cant tell which form - if any - it belongs to.  Do you have to report the negative clawback?

@DianeW777 

[DianeW777]

It depends. If you originally reported income from the ACAT clawback and now, based on the rules, you must repay some of that, it is considered as a 'Claim of Right' in the tax law. If the amount of the repayment is $3,000 or less there is nothing reported on your tax return.

The Claim of Right is explained more in the article below.  However I will add some information here about how to report on your tax return to determine if it applies to you and how you prefer to enter it on your tax return.

• What is a claim of right repayment?

Claim of Right

• If you had to repay an amount that you included in your income in an earlier year, because at the time you thought you had an unrestricted right to it, you may be able to reduce your income by the amount repaid in the current tax year if the amount you repaid is more than $3,000, or you may take a credit against your tax for the year repaid, whichever results in the least tax.

Taking the Income Reduction in TurboTax (most common)

1. Login to your TurboTax account or open your tax return.
2. Click on Deductions & Credits
3. Locate the section Other Deductions and Credits (you may first need to select on show all tax breaks if working online or I’ll choose what I work on if working in the installed desktop.)
4. Click Start (or Revisit) beside Other Deductible Expenses.
5. A number of questions will appear on the upcoming screens. You are looking for the one that reads Claim of right repayment over $3,000. Click yes when you see this screen. (Be sure to ignore the similar question, repayments of $3,000 or less.)
6. Enter the amount of the repayment in the box Claim of right repayment over $3,000 and click Continue.

Taking the Credit in TurboTax (Must use TurboTax Desktop)  How to switch from online TurboTax to the TurboTax software? 

There are two components to taking the credit in TurboTax. The first part entails determining the amount of the tax that was overpaid in the year the income was received. This requires using the TurboTax Desktop product (or another method) to determine what the tax liability would have been without the income. 

1. The credit can only be applied using the TurboTax Desktop product installed on a computer, in the Forms mode.
2. Switch to Forms mode by clicking on Forms icon in the program.
3. In the list of forms on the left click on 1040/1040RSR Wks above the Form 1040 itself.
4. Scroll down to Other Credits and Payments Smart Worksheet (near the bottom) and enter the amount that you have computed on Line D Claim of Right, IRC 1341 credit for repayments of prior year income.
5. Click on the Step-by-Step or Easy Step icon in the upper right corner to return to the interview mode and finish working on your tax return.

@askingaquestion 

[askingaquestion]

@DianeW777 

I appreciate the response.  I transfered crypto from one wallet to robinhood.  Robinhood gave me a bonus of $91 for this.  When I sold that crypto, they took away -$47.  This happened in the same month/same year.  That's why I get confused; the clawback articles seem to deal with bigger amounts and over longer periods of time.

[DianeW777]

It's a direct effect on your cost basis of the crypto. You should use the amount they took away as a sales expense on your sale of the crypto. This would be considered as an adjustment to your cost basis of the crypto and reduce your gain or increase your loss.

@askingaquestion 

[askingaquestion]

@DianeW777 

Okay, so adjust the cost basis for the crypto sale itself factoring in the clawback amount?  That's the only place it gets entered?

[DianeW777]

Yes, that's the only place you can use it simply because the crypto sale did occur and it was the reason for your loss of the clawback.

@askingaquestion