I file a 1065 for a short terms rental business (LLC passthrough), however Airbnb and VRBO sent personal 1099-k

[elbanev]

I run a short term rentals to which we file on a 1065 as an LLC partnership between my wife and I.  We have an EIN.  All AirBNB and VRBO revenue gets deposited in in a separate business checking account.

This year both AirBNB and VRBO sent 1099-Ks associated with my SSN.  These both should be business revenue, and not handle on my personal return (although net profit/loss is captured on my personal return).

How do I handle?  Will it be flagged if I ignore it on my personal return and my my business return as I have done in years past?

Best Regards,
Joe

[BrittanyS]

You will need to make a nominee entry on your personal return for the K-1.  See DianeW777's post regarding these steps:

"Since this shows the full amount under one person's name then each person should report their share of the income on their individual tax returns. 

Options: (Option 2 is recommended)

1. If you want to nominee the portion to the person whose name and social security number (SSN) do not appear on the form you can use the following information to do so.
2. The person whose name and SSN are on the document can simply include the income, then as a Miscellaneous Expense and write the words 'Nominee Name XXX-XX-XXXX (SSN of the person who is claiming the other income.

Nominee returns. 

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here: 

• Form 1096-Transmittal
• Form 1099-K"

See the link below for more information:

• Nominee Entry

[elbanev]

Thanks for the detailed reply.  

Since they are under my name and SSN, would the nominee by my business name and business EIN?

Do I have to file by mail as opposed to using to Turbo tax to digitally transmit? How do I attach the nominee form in turbo tax

[RobertB4444]

The nominee is your partnership name and EIN.  Then you will create a 1099-K for the partnership with all of the income coming from you as an individual.  That 1099-K needs to be prepared and submitted separate from your partnership and individual returns.

On your individual return you will have a schedule C that shows all of that income along with an expense - just entered on one of the lines (TurboTax has the ability to enter expenses with a name created by you) that says "Nominee (name of your partnership) (EIN of your partnership).  That zeroes out the income on your personal return and lets it come in through the K-1 from your partnership.

@elbanev 

[elbanev]

RobertB,

Thanks for the response. The nominee being the business and business EIN is clear.  Also clear is the fact the business has to issue its own K1s.

The first year (2021) we setup the LLC/partnership we had a CPA do the taxes - both individual and business.  The following year, I migrated the personal over to turbotax emulating what the CPA had done.  

The business income/loss has come into the 1040 from Schedule 1, line 10. Our business does issue a K1 to both my wife and I and we do capture this in TurboTax under the K1 Partner form and we have a Schedule E.  

Im hesitant to fill out schedule C as we haven't used that in the past.  Can we omit? I worry it will double count as the questions in the worksheet are captured either on the 1065 corporate return or elsewhere on the personal 1040 return.  How to include the NOMINEE to the business if filed electronically? 

Thanks,

Joe

I'm still worried about 

[RobertB4444]

The schedule C is there because that 1099-K has your personal information on it.  The IRS system tries to match income amounts to the social security numbers that received information returns like 1099s.  They will be looking for this amount on your personal return because your social security number was on the 1099-K.

You can skip the schedule C and just do the 1065 but that is rolling the dice.  You should expect to have to respond to any letter that you receive that the 1099-K that you got should have been issued to the partnership instead of to you as an individual and that the amounts from the 1099-K are included on the 1065 return.  The schedule C will just avoid making the IRS into a pen pal.

@elbanev 

[elbanev]

RobertB,

Thanks again for your continued support. I certainly do not want to be penpals with the IRS and would like to get it accounted for on the 1040.  I'm having a bit of trouble with en

In EZStep Mode, Federal Taxes, Wages&Income, I enter both Airbnb and VRBO 1099-Ks into the "Income from Form 1099-K".  My taxes owed jump higher.

Now in Forms Mode, I click on the 1099-K Wks (AIRBNB) and at the bottom of that form it has a 1099-K Reconciliation section.  On 2a, I clicked on Incorrectly reported amount and selected all.  This seems taxes my taxes back down to the the expected amount.  

Will this work (avoiding being penpals with the IRS)?

If not, I have tried to get into Schedule C and make edits as instructed, but I can't seem to figure out the mechanics of it.  Do you mind telling which lines I need to edit on Forms mode on Schedule C?

Thanks,

Joe

[DaveF1006]

Yes. Your reconciliation step removing the incorrect amount is allowed. If you needed to edit the Schedule C, you would go to the forms mode in your return and look for Schedule C.  You would make the edits in the Schedule C worksheet that appear below the Schedule C.