I made some money by lending stock through my brokerage. It was reported in box 3 of a 1099-MISC. Turbo tax wants to create a Schedule C for this income. Is this correct?

[TomYoung]

That income arises because the broker lent out your securities to a short seller.  The problem with this kind of activity is that a Payment in lieu of dividends is taxed at your marginal ordinary tax rate instead of the more favorable rates used for qualified dividend.

Report this on line 21 of your Form 1040 - Other income.

Start the "Miscellaneous Income, 1099-A, 1099-C" interview down at the bottom of the "Your 2015 Income Summary" page

Start the "Other reportable income" interview

On the page "Any Other Taxable Income?"  click YES

On the page "Other Taxable Income" ignore the "Do not enter income reported on Form 1099-MISC" warning and enter a description and amount.

Tom Young

[trevordkramer]

This isn't Payment in lieu of dividends - that was reported in box 8. This is income earned from actually lending the shares.

[TomYoung]

Ah.  Still it's ordinary income and line 21 or maybe line 8 (I think some brokers call this "interest" ) would be appropriate.

[MAFTAX]

I ran into the same thing this year with Fidelity.  TT created a schedule C and had me paying self employment taxes on it.  I went into the 1099 form in TT and in the 'Box 3' section put an x on the 'other income' and deleted the schedule C it created. 

[Paul212]

This is the third year in a row that I've had to jump through these hoops.  Trying to get fully paid lending income, which was reported to me on a 1099-MISC, to NOT be self-employment income.  I wish TurboTax would read their users comments and change their system. If it weren't for this thread, I'd be completely lost.  Thank you!

[Critter-3]

SAVE THESE INSTRUCTIONS ... THEY WILL WORK EVERY YEAR ...

You can report it as other income on Sch 1  line 8. Here's how to enter it in TurboTax.

• Click the Federal Taxes tab ( Personal in the Home & Business version)
• Click Wages & Income. (Personal income in the H & B version)
• On the screen "Your 2020 Income Summary," scroll all the way down to the last section, "Less Common Income."
• Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
• On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
• The next screen asks, "Did you receive any other taxable income." Click Yes.
• On the next screen, "Other Taxable Income," enter a description and the amount. Click Continue.
• On the next screen click Done.

The income will be reported on Sch 1 line 8 with the description that you entered.               

[sicha36kr]

Once at Other Taxable Income Screen, it literally says "do NOT enter income reported on Form 1099-MISC.

[AamilD]

@sicha36kr if you received a 1099-MISC which is not related to self-employment then please follow the steps below to enter the Form 1099:

1. Click on Tax Home from Left Side Menu.
2. Click on Wages & Income from the main screen.
3. Scroll down till you see the section titled "Other Common Income". Within this section, there will be an option for "Form 1099 - MISC".  Click on Start next to it. Then enter the information accordingly.

[sicha36kr]

Followed your instructions but the "review" is preventing me from e-filing.  It reverts back to Schedule C.

Box 3 Other income

Required: double-click to select the form on which to report this income:

Schedule C

Any idea how to bypass?

[DianeW777]

It's important that you made the appropriate selections so that TurboTax does know that it was not self employment income.

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

'No' on the screen 'Did the '____' involve work that's like your main job?'

'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).

@sicha36kr

[ROWEDENT]

I'm having the same problem but with the 2023 turbo tax delux version. It keeps trying to generate a schedule c.

What is the fix for this years version of the software? 

[SharonD007]

You can enter the income as “Other Income” so it won’t be subject to self-employment taxes.  Follow the steps below:

1. Open TurboTax
2. Enter 1099-MISC in the search bar
3. Select Jump to 1099-misc
4. Select Yes to Did you get a 1099-MISC?
5. Follow the prompts to enter your 1099-MISC
6. Enter the reason to Describe the reason for this 1099-MISC
7. Select None of these apply to Does one of these uncommon situations apply?
8. Select No to it didn’t involve work like your main job
9. Make your selection to How often did you get the income?
10. Select No to Did it involve an intent to earn money?

For additional information, review the TurboTax articles What's the difference between self-employment income and other income? and Where do I enter a 1099-MISC?

[paul148]

As others have already said, the key to making it work is telling Turbo Tax "NO" when asked if the income involved an intent to earn money (even though it very well could've involved an intent to earn money).

Reader comments posted on this page have saved me so much time!   Thank you!