Where do you enter 1099-K credit card payments to a business on form 1041, schedule C?

[rhalexda]

After my mother died in March 2023, I was slow getting a trust EIN, and in informing the credit carder servicer for my mother's motel, of her death. They sent her a 1099-K under her individual SSN, including credit card payments made after her death, which rightly must be reported on 1041 Schedule C as trust income. As yet, the filer has refused to re-issue separate corrected 1099-K forms for pre-death payments under her SSN, and post death payments to the trust under the trust's EIN. Her individual 1040 schedule C income is far less than the total 1099-K payments. And I would expect the IRS to go ballistic.

Firstly, how and where do I report 1099-K income on schedule C, form 1041?

And more difficult, if the filer refuses to re-issue separate corrective 1099-K's, how can I inform the IRS that the 1041 Schedule C gross income includes amounts erroneously reported under my mother's individual SSN on her 1099-K?

IRS.gov indicates that on an individual's form 1040, to enter the correction on Schedule 1, Part 1, line 8z, Other Income: "Form 1099-K received in error, (amount)," and the adjustment on Part 2, line 24z, Other adjustments: "Form 1099-K received in error, (amount)." But there is no mention of what to do to correct a 1099-K for form 1041, schedule C.

[tagteam]

I am sorry for your loss.

Was she a cash basis taxpayer or accrual?

https://apps.irs.gov/app/vita/content/0507/0507_01_015.jsp

[tagteam]

Also, Schedule C must be prepared using Forms Mode in TurboTax Business, but it is generally not appropriate unless the estate or trust continues to operate a business.

[rhalexda]

Thank you.

Cash basis.

And I continued to operate the business until the properties were deeded over to the beneficiaries Feb. 28, 2024.

The IRS website seems to indicate just to be sure that the 1099-K amount is included in the gross income, without breaking down how much of the gross came from what.

My problem is that the entire 1099-K amount was issued under my mother's SSN. I'm thinking of filing an amended individual 1040 for her, referencing the correction and the trust's EIN on Schedule 1, Line 8z and 24 z, as IRS.gov recommends, and leave it at that. ??

[JotikaT2]

For the 1099-K information, if the issuer is not willing to provide a corrected 1099-K form to break out the income earned when your mother was still alive and up to her date of death, and another 1099-K starting after she passed, you can definitely break it out on the individual return.  This will ensure the correct amount is reported on the individual return and the trust return.

When you amend your mom's final return, I'd recommend making this adjustment on the Schedule C input for the individual return itself to ensure you are not overpaying any self-employment tax on her final return.  

1. To make this reduction on her amended final tax return, log back into TurboTax and select the Business section.  
2. Select Business income and proceed through the screens until you see the option for Other Income.  
3. Select start/update to the right of this and make your adjustments listing the trust's EIN on this screen.  Enter a negative amount for the income amount that should be allocated to the trust.

This adjustment will be reflected on the Schedule C worksheet.  Retain this information should the taxing agencies request additional support.

Also, when you list the reason for amending the return, you can also put the trust EIN number in the description, as well as providing the amount of income that is being allocated to the trust.

I am sorry for your loss.

@rhalexda