1099-MISC - Rental Assistance

[lulalee]

I have a renter that did not pay his rent during the pandemic.  He requested rental assistance from the city which I received.  The city issued a 1099-MISC and put the income in Box 3 as "Other Income" rather than rent.  When I enter this under the 1099-MISC section, it is asking me if "it involved the intent to earn money."  Do I answer "Yes" for this question even though I feel this money should have been categorized as rent?

[DanP0428]

Answer No.  The question is confusing but answering yes will make it a Schedule C and that is not correct.

[ColeenD3]

Put it in as suggested above and then back it out the same way with the description of improperly recorded rent. Then enter it on Schedule E, so you can show the rental income and be able to take your expenses.

[vmart15]

I have the similar situation with that 1099-MISC. What do you mean by "back it out the same way with the description of improperly recorded rent"? How would I back it out?  

Thank you!

[LeonardS]

You will "back it out" by entering the 1099-MISC a second time using the description Improperly Recorded Rent and enter the amount as a negative number.  This will back out the 1099-MISC.  Then enter it on Schedule E, so you can show the rental income and be able to take your expenses as @ColeenD3 explained in her post.

@vmart15

[lulalee]

A couple of follow up questions/comments:

1. Under the Income from Form 1099-MISC section, do you use the same name for the "Paid By" entity OR is the name what you would put as "Improperly Recorded Rent?"

2. I had added another 1099-MISC like you suggested with the negative amount but it didn't seem to take. Although the amount on the 1099-MISC Summary page shows a total of 0, the original amount still shows up as "Other Income."

Thank you for the help!!

[JamesG1]

(1) Please report 'Improperly Recorded Rent'.

(2) Are you able to review the Federal 1040 and Schedule 1 to see whether the income was properly reported as +$1 and -$1 = $0?

View the Federal 1040 and Schedule 1 entries at Tax Tools / Print Center / Print, save or preview this year's return.

[vmart15]

When I input the 1099-Misc as other income ( exactly as shown on the 1099) and then re-input as a negative amount as "Improperly Recorded Rent" to back out, my federal tax liability still shows the increased amount from the original other income input. Shouldn't that tax liability decrease (off-set) after I back it out as the negative amount?  

[ThomasM125]

The entry you describe will reduce your income, but that may not affect your tax liability for other reasons. I suggest you look at your form 1040 before and after the negative entry to other income to see what changes after you make the entry.

You can view your form 1040 while working in the online version of TurboTax by following these steps:

While working on your return in the Federal section of TurboTax:

   1.  Choose the Tax Tools icon on your left menu bar

   2.  Tools

   3.  View Tax Summary

   4.  Choose the Preview my 1040 on your left menu bar

@vmart15

[lulalee]

@JamesG1

Yes, I was able to review the 1040 and Schedule 1 but the income was not properly recorded as +$1 and -$1 = $0. It only showed the +$1 and not the -$1.

Thank you!

[DianeW777 · Accepted solution]

It's actual rent income and should be reported as such regardless of how it shows upon the Form 1099-MISC .  Enter the Form 1099-MISC as rental income, box 1.  Do not enter it in box 3.  This will process the income exactly as it should be on your tax return.

@lulalee

[Edited: 04/18/2022 | 8:59a PST]