How to Handle Adjustments to 1099-MISC and 1099-DIV

[cactusjack]

I'm filing taxes for my mother who passed away in October of 2021, and have a few questions for the experts.

1099-MISC Form:

The first question involves a rental property that was owned 75% by my mother and 25% by my uncle.  The home served as a group home for disabled adults, and rent was paid by a non-profit organization that provided a 1099-MISC form with 'Rents' shown in Box 1.  Normally, my mother gets a 1099-MISC showing 75% of the rent, and my uncle gets a 1099-MISC showing 25% of the rent.   

This year, in addition to rent, the organization made back-payments for utility bills that were mistakenly missed over the past few years.  The issue is that they paid my mother for 75% of the rent but 100% of the utility back-payments.   My mother then transferred 25% of the back-payments to my uncle.   The 1099-MISC shows the 75% rent plus 100% utility payments, which is correct from the organization's standpoint, but doesn't account for the 25% of utility payments my mother transferred to my uncle.

Question 1:  What's the proper way to address this?  Enter the numbers per the form first, and then make a negative entry under Less Common Income - Miscellaneous Income?

1099-DIV:

Dividends from investments were received before and after my mother's death in October 2021. The investments were originally in a living trust tied to my mother's SSN.  After she died, a separate trust was established using an EIN for tax purposes.

The initial Form 1099-DIV received was incorrect and did not reflect my mother's death.  After waiting several months, we finally received a form for the new trust under the EIN (still waiting for the corrected form tied to my mother's SSN).  However it's still showing dividends received from early 2021 while my mother was alive that should be tied to her tax return using her SSN.  

Ideally, we would get corrected forms for both returns (my mother's and the new trust), but at the rate it's been going, I'm looking for guidance on how to handle this assuming the corrected forms are not available.  I have details and dates for all dividend transactions, so it's pretty straightforward to figure that part out.

Question 2:  What's the correct way to handle this?  Should I enter it as shown on the 1099-DIV first, and then make a negative entry somewhere else?

Thanks.

[AmyC · Accepted solution]

1. Yes and yes. Nominee income is when you nominate someone else to receive the income. Your uncle will be nominee for the 25% of the utilities. Same for your mother's personal return vs the estate, assign nominee  as needed to whichever way is correct for each form.

2. Yes. Enter the forms as received and subtract out with a negative entry under less common income with a description*:

nominee 1099-MISC income -$xx

nominee 1099-DIV income - $yy

The correct way to handle this:

For the 1099-MISC, you are supposed to give your uncle a 1099-MISC from your mother (or estate if that is the case) to him. For interest/ dividends, etc - again you would pick the matching form and have it go from one party to the other. I feel that proving the move between mom and estate would be simple enough.

Forms and instructions needed:

• About Form 1099 DIV, Dividends and Distributions
• Instructions for  Forms 1099-MISC and 1099-NEC
• Form 1099-MISC

*follow these steps:

1. go to the federal income section
2. scroll to the bottom
3. Miscellaneous Income, 1099-A, 1099-C, Start
4. Scroll to the bottom
5. Other reportable income, Start
6. Other taxable income?
7. Select YES
8. Description nominee 1099-MISC 
9. Amount, enter your amount as a negative
10. continue

[cactusjack]

AmyC - Thank you for the clear explanation!  This is extremely helpful and greatly appreciated.

I have a few follow-up questions as follows:

1. For every 1099 I generate, I will also need to send Copy A to the IRS, correct?   Using the links you've provided, the IRS document states that Copy A from the website cannot be printed and filed (because it's not scannable), and must be ordered from the IRS.  I've ordered the necessary forms, which should be sent within 10 days.  Hopefully I'm on the right track here.

2. For the nominee descriptions with negative entries, do I need to include the SSN/EIN for each entry so the IRS knows where money was sent?

3. Form1099-MISC, Copy A states "File with Form 1096".  What is Form 1096 and is it necessary in this case? 

Thanks again!

[DianeW777 · Accepted solution]

Yes, you must send copy A to the IRS with Form 1096-Transmittal (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.

If you send Forms 1099 to the appropriate persons with the amounts that are not yours, you do not need to enter any negative amounts just enter your share of the income. The 1099s filed with the IRS will take care of letting them know how much is yours versus other owners of the income.

If you choose to do that you can, simply type nominee and the SSN of the other owner(s)of the income.