I received a 1099-misc with other income

Forum|Forum|7 years ago
June 1, 2019
2 replies
0 views

We received a 1099-misc other income from the county for tree's that are going to be removed with the reconstruction of the county road in front of our home. The tree's are either going to be in the new right away or need to be removed during construction. Is there anything we can use to offset the income? We do not make money from the sale, removal or moving of tree's. This is a one time payment. The tree's will not be replaced or if replaced not for a year or two.

TurboTax Home & Biz Windows

KrisD15

Level 15

Yes, report the 1099-misc and then a negative adjustment. Payments for easements are not taxed, but the basis in your property must be reduce by that amount.

Sign into your account and return. Click the “Pick up where I left off” bar

Click on Federal on the left side-bar, then Wages & Income along the top.

When you get to the Income section, (you may need to click "Show All Income" first) Scroll down to Other Common Income and Click Show more

Click Start or Revisit for Form 1099-MISC

Enter a description for the non-work income, such as “Easement Payment” for the reason and Continue

Click “None of these apply.” at the bottom of the list for “Does one of these uncommon situations apply? And Continue

Answer “No, it didn’t involve work like my main job.” on the next screen and Continue.

Click the year you got the reward and Continue (if you received this income for more than 2 years, the IRS will consider it as self-employment)

Answer “No, it didn’t involve an intent to earn money.” on the next screen and continue.

Do you have another 1099-MISC? Click No and Continue

Click Done.

The income will show as a line item on line 21 of Schedule 1 of the 1040 and not as Self-employment.

Next, make the adjustment for the reduction in value (basis)

Click on Federal,,,Wages & Income,,,,scroll down to the last section "Less Common Income"

Scroll down to the last choice "Miscellaneous Income, 1099-A 1099-C" and Start

Scroll down to the last choice "Other reportable income" and Start

For the Description enter "Reduction in basis for easement"

Enter the amount of the easement payment AS A NEGATIVE NUMBER

(remember that you are also reducing the basis in your property by this amount.)

Click Continue and Done

The 1099-MISC and your adjustment will show on Schedule 1 line 21 and flow to the 1040.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

tam1325Author

Level 2

Can I deduct the amount even though it wasn't for the land? I got a separate 1099-S for the land. This is just for the tree's in the way.

newlin03

Level 2

I would just like to comment that I followed the instructions at the beginning of this thread on my 2022 return and this week received a letter from the IRS along with a hefty proposed amount due saying they disagreed with this approach and negated my "offsetting adjustment".

newlin03

Level 2

Following up as I was able to successfully appease the IRS in a way that left me with no Tax liability. As previously stated I followed the guidance at the beginning of this thread and the IRS shot that down, saying I should have reported it as ordinary income. After providing them information showing the payment was for an easement, I was instructed that I had to reflect it as a capital gains transaction on form 8949 and Schedule D. So listed it as a sale of property in the long-term section, and I made the cost basis equal to the proceeds resulting in a zero net gain. Per IRS Publication 544, If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. I included this statement in my response for why I used this cost basis. The IRS accepted this response / adjustment and relieved me of my proposed balance due.