Tax Exempt Income Reported on 1099-NEC

[kc-ct]

I volunteer as an EMT in my town and receive a property tax deduction, which was reported as income for 2022 on a 1099-NEC.  As part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 this income was made tax exempt for both federal and state.  How can I include the income on my return but not have it added to my taxable income?  If I leave it off the return it will be flagged as a mismatch since the town will report it.

[kc-ct]

Follow-up: I found this guidance:

Volunteer firefighters and emergency medical responders.

If you are a volunteer firefighter or emergency medical responder, do not include in your income the following benefits you receive from a state or local government.

• Rebates or reductions of property or income taxes you receive because of services you performed as a volunteer firefighter or emergency medical responder.

However I'm worried that the omission will cause a red flag since it's a filed 1099-NEC?

[ThomasM125]

You are correct, it could cause a problem if you didn't report the income.

You can report the income on your tax return and then enter a negative adjustment to Other Income to cancel it out.

Enter the form 1099-NEC in the Income and Expenses section of TurboTax, then Other Common Income, then Income from form 1099-NEC.

Follow these instructions to enter the adjustment:

Go to the Income and Expenses section of TurboTax

 - Choose  Less Common Income

 - Choose Miscellaneous Income, 1099-A, 1099-C

 - Choose Other reportable Income

 - Enter a description and the amount (as a negative number) of your excluded income

[kc-ct]

Thank you!

[Mike9241]

your other option is to contact the issuer and have them issue a revised 1099 showing zero.   if they keep doing this you'll face the same issue next year. if the income is not taxable the 1099 should not be issued.