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1099-NEC input goes no where in the return.

ric
Level 2

The 1099-NEC input amount goes no where in the tax return. You must use the Misc Income - Alimony and Other Income and input on Other Income line.

the 1099-NEC input is useless the number inputted goes nowhere!

This has caused me to understate the 1099-NEC income. 

This is bad as it leads the preparer to input data that they believe will be in the return but does not go into the return, thus understating income. 

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16 Replies 16
sjrcpa
Level 15

Even better you should put it on Schedule C per the IRS.

As a Preparer you are supposed to review the returns.


ex-AllStar
IRonMaN
Level 15

"This is bad"

It's even worse for the folks that paid some of their hard earned money to someone to prepare those returns.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
ric
Level 2

First - I don't think you "get it" - the software is causing "unforced errors" with blank input fields.

Second - One time casual income is not  "trade or business" income and does not go on Schedule C. You should read the instructions. Obviously, you have caused people to pay unnecessary SE tax.

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sjrcpa
Level 15

@ric In your OP you did not mention it was one time casual income.


ex-AllStar

1099-NEC instructions

Self-employment tax

Generally, amounts reportable in box 1 are subject to self-employment tax. If payments to individuals are not subject to this tax and are not reportable elsewhere on Form 1099-NEC, report the payments in box 3 of Form 1099-MISC. However, report section 530 (of the Revenue Act of 1978) worker payments in box 1 of Form 1099-NEC.

 

In preparing 1099's, my office's practice is to put "one time casual income (No SE tax)" in Box 3 of 1099-MISC. 

If my client got a 1099-NEC for non-SE income (this year, several received 1099-NEC that reported their RENT! income; some property managers were excited about the NEW form...) - especially when the amount is significant - I would ask the client to have the issuer file a corrected 1099.  Who knows how the IRS will follow up....

2020 is the first year of 1099-NEC, and likely the enforcement (following up on SE tax) could be loosy goosy .  Down the road, if my client gets a 1099-NEC especially for a decent non-SE income, I would consider putting the amount on Sch C and backing it out with a contra deduction plus a supplemental note - EVEN IF a corrected 1099 is filed.   

Over the years, I've represented clients in audits that were triggered because of a small item of Unreported 1099 income.

Also, the Asker seemed to indicate the 1099-NEC info went no where.  I interpreted it as "No where" including the Misc income line (without SE tax).   Income tax would still have been under-reported.  

Live and learn.

 

 

 

 

TaxGuyBill
Level 15
@joshuabarksatlcs   You said "In preparing 1099's, my office's practice is to put "one time casual income (No SE tax)" in Box 3 of 1099-MISC. "

How would you know that about the recipient of the 1099?

IF I know - the recipient told the payer who instructed me so.    

Example: IF a real estate broker paid out a referral fee, I'd ask whether the recipient was an agent.  Yes: Old 1099 Box 7 / Now1099-NEC); NO: 1099 Box 3.

I hope I did it right.

Perhaps I should have said "Income not subject to SE tax, including but not limited to: Referral fees, finders fees, incentive payment, paid to folks not in a trade or business; other one time casual income, if the issuer know about it and in good faith wants to report that way... etc"  

But it would get rather clumsy...

qbteachmt
Level 15

@ric 

Here's the problem: "This has caused me to understate the 1099-NEC income."

You, not the Program, are in charge.

The 1099-NEC is how someone reports your client to the IRS, that there is something the IRS should expect to find listed on your client's tax return. As the Preparer, you are supposed to put on the tax return everything you client tells you about, even if that was not revealed to the IRS via form 1099. You know better than to avoid reporting the sale of real estate, just because they sell it to a family member, as an example, and don't go through a 1099-S process. Having or not having a 1099 doesn't control what you are supposed to do for that client. And you also know that your business client might not get any 1099-NEC, and yet might have $5m in net taxable business revenue. So, complaining that the Informational Form entry didn't flow somewhere does not result in your under-reporting. Your own oversight in confirming everything is entered as it needed to be, is where this fell short.

Because, as you pointed out, you need to control where that is reported, and there is not one size fits all for the use of the 1099-NEC as an input form.

All you did here is complain. This is an Ideas Exchange. Did you want to submit some Idea here, that would be helpful?

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"Level Up" is a gaming function, not a real life function.
ric
Level 2

to: qbteachmt

First, I was recommended by Lacerte help line personnel to post the 1099-NEC issue on the Idea's Exchange to alert other preparers and Lacerte about a potential program improvements. 

Second, I feel you want to shame me on a public exchange:

a) to shame me by defining this as a "complaint" unworthy of an Ideas Exchange. 

b) to shame me by lecturing about prepare responsibility 

Who appointed you as the Grand Marshal of the Ideas Exchange to "lecture" and "complain" about content without some idea.

 

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IRonMaN
Level 15

"Who appointed you as the Grand Marshal of the Ideas Exchange to "lecture" and "complain" about content without some idea."

Actually, we tried having a vote but nobody wanted to run for the position.  She missed one of our Ideas Exchange Board meetings so the board unanimously voted her in.  She is willing to step aside if you are interested in the job.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)

I was going to quote Captain Dudley Smith : I wouldn't trade places with @qbteachmt right now for all the whiskey in Ireland.

Then I found out qbteachmt is a she, and paused.

Male chauvinist, I.

 

qbteachmt
Level 15

"on the Idea's Exchange to alert other preparers and Lacerte about a potential program improvements."

But you still have not posted what you feel would resolve this, and there is no Idea offered.

"Second, I feel you want to shame me on a public exchange:"

You are not Shamed. You are not participating in your own resolution, either.

I'm trying to get you to Focus. Offer something worthwhile, and others will vote. Complain, and all we can do is suggest how you control your own actions and your own response to the condition about which you are complaining.

If you are not going to paint, you might as well get off the ladder.

*******************************
"Level Up" is a gaming function, not a real life function.
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ric
Level 2

qbteachmt

But you can't stop harping. A control freak, dictating specific behavior, deemed required by the self appointed Grand Marshall.

If you cannot act act with courtesy, don't come to the party.  

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qbteachmt
Level 15

And you still have not posted an Idea, into the Idea Exchange, so there is nothing to vote for. The main forum is where people ask for help and post complaints. The Idea Exchange is your place to make a difference.

*******************************
"Level Up" is a gaming function, not a real life function.
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scheunemanncpa
Level 3

The entry in 2099-NEC is for entering state withholding in a variety of states.  There is a blue bar at the top of the screen that explains what the entry there is for.  It is easy to pass that up.  You only need to enter each 1099-NEC in this screen if there is state withholding.  After that it is up to you to enter the income in the appropriate place.