If you received an erroneous 1099-Misc, you have several choices:
1. Ideally, you get a corrected 1099-misc
from the payer
2. Don't report it on your return. Attach a
copy of the 1099 and a statement explaining the circumstances. You can't
e-file. From the IRS instructions for form
1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been
issued in error, contact the payer. If you cannot get this form corrected,
attach an explanation to your tax return and report your income correctly.
3. Report the Income on schedule C and take
a deduction under other expenses, call it something like "nominee
recipient adjustment". More properly you should call it Cost of goods sold, but that's harder to enter in TT**.
4. Report the income as misc line 21
income (enter in TurboTax at the 1099-Misc screen) .
Then enter a line 21 deduction,
for the same amount. In TurboTax (TT),
enter at:
- Federal Taxes tab
- Wages & Income
- “I’ll choose what I work on” Button
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other
reportable income - Enter the number with a minus sign (-) in front. Briefly
explain at description. I would say "Cost basis if 1099-Misc"
5. (this option is not available with online TT) Report the income as misc line 21 (of
form 1040) income. Then take a line 36 deduction. In the forms mode, open form
1040. Scroll down to the "Other adjustments to income" "smart
worksheet" and enter your deduction in line H. Type in…."expenses of
1099-Misc income" or "nominee recipient adjustment to 1099-Misc
income"
6. Do nothing and hope you can explain it
away when & if the IRS contacts you
**To enter cost of goods sold (COGS): when asked if you have inventory answer that you Buy and immediately resell goods. When asked how you account for inventory answer lower of cost or market value. For beginning inventory for 2016, enter the sale amount of the tractor/mower ($8000). For ending inventory enter 0. That will make your profit 0.
