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herosupport
New Member

1099-MISC Box 3 Causing Erronous Tax

We own vacant land. A geophysical company showed up asking for access to the land to gather seismic data. They placed their test equipment, ran it for a day, packed up and left again. 

They sent us a 1099-MISC with Box 3 income for that one-time incident.  We did not do any work, nor provide any goods or services for this company.  No other boxes are checked.

In TT, when adding the income in the module '1099-MISC and Other Common Income', 'participated in survey' and to 'Did you perform a service to earn the money...' = answering 'No', TT treated it as self-employment income, and invoked taxes owed. 

I also tried 'None of the above' thru ' Intent to earn.." = No, and it got even worse.  

Tried to enter under the module "Business Income", but TT did not allow input for 1099-MISC Box 3 in that section.   

If anything, this should be reimbursement for damages to the land, and the company should have never sent a 1099 MISC Box 3 for this.  

Yet, TT force-treats this as taxable income, and I can't get through without causing a tax liability one way or other, which it is not..  

While I understand that TT is not perfect, I am also thinking that if I send the IRS a return showing through TT that I owe money (which I don't, but I can't get through unless I totally ignore this, which is not right either, because the company files their own tax report that they 'paid' me something, and I'll get dinged for not reporting 'income' [which isn't]) ), why would the IRS really go back and check that I really do not owe anything?  

Any good ideas?

2 Replies
CherylW
Level 3

1099-MISC Box 3 Causing Erronous Tax

You'll have to pay federal tax on it, but not self-employment tax.  Here's how to do that in Turbo Tax:

1.  Click Federal Taxes across the top.

2.  Click Wages & Income across the top.

3.  Click I’ll choose what I work on.

4.  Scroll down to 1099-MISC and Other Common Income.

5.  Click Start or Update by Income from Form 1099-MISC.

Enter your 1099-MISC on Let's get the info from your 1099-MISC. 

Enter the reason for the 1099-MISC on the next page.

Check the box by None of these apply on the Does one of these uncommon situations apply?

Check No, it didn't involve work like...

Check you got it in 2018 on the next page.

Check No, it didn't involve an intent to make money on the next page.

Answer No to Do either of you have another 1099-MISC?

Click Done.

That will make it federally taxable, but not subject to SE tax.

wl2528
New Member

1099-MISC Box 3 Causing Erronous Tax

It also worked on 2019. thanks for the tip. 

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