If you rent property, such as a home or room, you may receive a 1099-K if the payments were made through a a credit or debit card or a payment app. Third-party payment networks are required to file Form 1099-K with the IRS and provide a copy to you when the gross payment amount is more than $20,000.
Your rental income reported to you on the 1099-K would need to be reported on either the Schedule E (most common) or Schedule C. Schedule C is used if your rental properties are owned under an LLC and you are the sole owner.
My roommate sent me their half of the rent and I received a 1099-K. What do I do?
If your roommate sent you their half of the rent and you are not the owner/renter of the property, the IRS requires you to report the income and then subtract it. The IRS has provided guidance using a two-step process on how to accomplish this.
Reporting the income:
Follow these steps within our program to report the income.
- Federal Section
- Select My Forms
- Less common Income
- Other Income Not Reported Elsewhere
- Choose Other Income
- Enter the description of the income (why are you deducting it) as "Form 1099-K received in error, $XXX" and include the dollar amount.
- Enter the amount of the income you are reporting from Form 1099-K
- Continue to save your entry
Subtracting the Income:
Subtracting the income will be a duplicate entry with a small change.
If you are reporting the subtraction immediately after making the income entry, select '+Add an Other Income Item' and continue with steps 7-9. Otherwise, follow the steps below to make your subtraction.
- Federal Section
- Adjustments to Income
- Other Adjustments
- Other Adjustments Not Listed Above
- Enter the Description as 1099-K received in error
- Enter the amount that should not be considered income on the 1099-K
These two entries will cancel each other out (provided they are the same amount) and result in no taxable income.
What if my 1099-K has both personal and my business income?
If the 1099-K has both income that is not taxable, such as personal payments, and business income, you will need to make an adjustment to remove the non-business income. In this situation, you would follow these steps:
Report the business portion of the 1099-K as usual but report only the business income amount. Pull that income to the Schedule C, E or F as required.
Report the personal portion as instructed in the above section with some adjustments:
- On step 7, enter the description but only include the dollar amount that should not be considered business income.,
- On step 8, enter only the amount of the 1099-K income that is for personal reasons (not business income).
For additional information on 1099-K reporting, please visit our Knowledgebase