Other Income

[Jimbo]

Isabella G,

 Thanks  for responding!! The income comes from notes (example-Barclays Bank PLC MTN 6.9% that pay monthly coupon 

payments. Coupon payments continue to be paid monthly or annually (depending upon the note) as long as the S&P does not 

drop 20% from what the S&P was when you bought the instrument.  These payments used to show as interest income on the brokerage 1099, but now they show as other income on the 1099. Should I be showing this income as something other than

"other"?

Thanks,

Jimbo 

[IsabellaG]

Well, there's no way that this is Schedule C self-employment income. It still sounds like interest to me, unless there's some other component of the coupon payment that I don't understand. If the brokerage sent you the equivalent of a 1099-MISC, with box 3 filled in for "other" income, I'd report it as a 1099-MISC, but continue with TurboTax to say that it's interest on a note, that it doesn't involve work like your main job, that you got in 2018 (only check 2018) and that it does not involve an intent to make money. I know that sounds counter-intuitive, but that's how you get the income reported as Other income, not self-employment income. If this isn't on a 1099 equivalent  (brokerage statements can be quite involved). I'd just report it as interest income. And I'd surely ask the brokerage the reason for the change.

[Jimbo]

Isabella G,

Yes, they show it as Other in box 3. I called the brokerage company and they said the IRS changed how to report that type of income.

As I mentioned earlier, the same thing happened with my in laws account and they have a different Brokerage Firm.  I'll try and do what 

you suggested.  I'm just concerned that if I don't report it as shown, it'll raise a flag with IRS.  Last year I just bit the bullet and paid the self employment taxes, etc.  I look at it pretty much the same way you do though.  Thanks so much for your help!!! I'd be interested to know if 

anyone else has run into this situation.  Let me know if you have any additional ideas.

  Thanks Again,

   Jimbo

[IsabellaG]

My instructions will have you reporting the income as shown on 1099-MISC with box 3. It's box 7, Nonemployee Compensation, that almost always counts as self-employment income, but "other income" is a different story. You definitely don't pay SE tax on that, and my instructions will make sure that you don't. Those questions in the interview are to help TurboTax decide if this is income from a business or side work, or if it's something else. This will not create a problem with the IRS. 

[Jimbo]

Thanks Soooo Much Isabella G!!!  I will follow those instructions and let you know if I have any problems.  If that's ok with you?

Thanks Again!!!

[IsabellaG]

Great!  You're welcome!

[Jimbo]

Hi Isabella G!!

Have another question for you.  If during the year you received W-2's from various jobs but also received a 1099 for some side work you did, Can the 1099 income be considered Business Income?  In Ohio you can deduct the first $250,000 of "Business Income" from your State Taxes.

Thanks,

Jimbo

[IsabellaG]

Yes, 1099 Nonemployee Compensation (Box 7) for side jobs is considered business income.

[Jimbo]

Thanks Isabella!! I thought so, but wasn't 100% sure.

Thanks Again,

Jimbo

[Saineel]

for 2021 taxes, I am encountering the same problem as reported by other taxpayer. Is it ok to treat the coupon payments as INTEREST?

thanks in advance

[DianeW777]

it depends.  If the income is reported on Form 1099-MISC you should report it using the steps below.

This income is not business income, rather miscellaneous as indicated by your Form 1099-MISC. It's your money making money for you and not because of a service you performed.

It's important for you to select 'None of these apply" and then you should also select the following:

1. Other Common Income > Form 1099-MISC
2. 'No' on the screen 'Did the '____' involve work that's like your main job?'
3. 'No' on the screen 'Did the '____'  involve an intent to earn money?' 

This will report the income without any business activity and it will show up on Form 1040, Line 8 (From Schedule 1, Line 8z).

@Saineel