Splitting 1099-C on return between self-employment and other income

[Golong]

Hello.

I received a 1099-NEC from a client. The income was from two different sources:  consulting (for which I will pay self-employment tax) and a my share of a licensing agreement for which I receive payment even if not providing any other services now or going forward.  How do I split this on my return income between Schedule C and other income?  

[RobertB4444]

If the licensing agreement is for using something that you have created then it is classified as royalties and should be on a 1099-MISC.  I recommend that you go back to your client and request that they issue you a revised 1099-NEC and a 1099-MISC with the two different payment amounts entered properly so that you can enter it correctly into your tax return.  Otherwise, the IRS is going to expect to see the total amount of the 1099-NEC on your schedule C.

If you can't get the corrected forms then you can separate out the two payments and enter the royalties in under the investment income section of TurboTax.  However, this may lead to questions from the IRS down the road if they want an explanation of why the royalties were on a 1099-NEC.

@Golong 

[Golong]

Hello Robert.

Thank you. 

I have asked for a revised 1099-NEC and a new 1099-MISC but the company has said that it "can't do that" because of cost (or perhaps because I am cutting back my on my work for them ...)

Do you have a recommendation on how to effectively separate the two separate incomes from the same 1099-NEC.  Would I in business income reduce the amount shown on the 1099-NEC by $XX and then add $XX as a separate entry in investment income? 

Thanks.

[MarilynG1]

Yes, you could enter the amount of the 1099-NEC as Business Income, then have a 'Miscellaneous Expense' adjustment for the 'Income Transferred to Royalty Income'.

You can report the amount of Royalty Income you received without a 1099-Misc.  

@Golong