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1099G Box 6 taxable grant. Can't get amount to flow to Sch C.

cafroning
Level 1

I have a client who is a hairdresser.  She received a COVID grant which is reported on Box 6 on a 1099G.  She has a Sch C and I can't get the $12,000 to flow to the Sch C.  It goes to Sch 1 line 8 other income. Any suggestions?  Intuit hasn't provided any guidance.

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16 Replies 16
jeffmcpa2010
Level 8

Delete your 1099G input and just enter the income direct on the Schedule C.

Other than Unemployment, State Tax Refunds, 1099-Misc other income, I rarely (never) use any 1099 inputs. I just put the total amount of Income received on the appropriate line on the C, E F or whatever form applies.

BobKamman
Level 14

How did you determine that she is in the trade or business of receiving government grants?

qbteachmt
Level 15

The CARES business grants are taxable income through the Feds except for a few specific purposes; the State might not tax it, though.

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BobKamman
Level 14

@qbteachmt 

I don't disagree that it's taxable.  I wonder if it goes on Sch C and SE.  And maybe on Sch EIC, if the taxpayer wants it to generate another $5,000 credit.  Others have asked questions about where to report these items, and I may have missed the answers.  

qbteachmt
Level 15

Yes, it goes on Sched C. Yes, it's subject to SE. And yes, it doesn't "flow" from box 6.

I've had the MT grants webpage open for a year. The DOR includes this:

"Montana received $1.25 billion in funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed March 27, 2020, to use for necessary expenditures related to the COVID-19 pandemic. Among other things, Montana created several business grant programs with this funding to aid Montana businesses with the costs and financial losses that occurred because of the pandemic.

Montana law states that Montana Adjusted Gross Income is derived from Federal Adjusted Gross Income. Unless expressly exempted by federal or Montana law, grant income to businesses is included in a business’s federal taxable gross income and, therefore, included in Montana taxable income. As of the printing of this article, the IRS has not exempted Montana business grant funds from gross income and reminds taxpayers and preparers to include these amounts on 2020 business income tax returns. It should be noted that while a grant recipient is required to include the grant in its gross income, it can deduct and/or capitalize the business expenses it paid for with these grant funds.

Grant recipients can expect to receive a Form 1099-G with the amount of grant funding it received by January 31, 2021.

For more information regarding reporting of grant income, see the IRS’s FAQs regarding CARES Act state-funded grant programs here: https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions."

Which is that same IRS link I have been using on this forum. There are some specific grants that are not taxable, such as HVAC, Food Bank, Medical providers. Most businesses that got one of these were supposed to use it to mitigate costs due to the pandemic conditions and restrictions. The taxable income will be offset by the expense or investment it produced.

These are Business Grants.

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BobKamman
Level 14

In other words, nothing for or against being included in self-employment income on Schedule SE, or earned income on Schedule EIC.  A brave practitioner would sign a return today; a coward like me would file an extension and wait for IRS guidance (that may never come).  

qbteachmt
Level 15
"would file an extension and wait for IRS guidance (that may never come)." What is missing? The 1099-G grants reported by State, County, City, Health Dept or public agencies, to businesses, are taxable business income; yes, it is subject to SE; yes, the IRS states their position in that link. Unless this is explicitly exempt, it is treated as regular business income. Some issuers have it as exempt for State reporting purposes, because that's up to them for how they allocated the funds accordingly. I have been following these from the beginning: "This financial assistance was funded through $1.25 billion in federal emergency relief funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The receipt of a government grant by a business generally is not excluded from the business's gross income under the [IRS] Code and therefore is taxable. More information is available here." And here is "here:" "Q. If governments use Fund payments as described in the Fund Guidance to establish a grant program to support businesses, would those funds be considered gross income taxable to a business receiving the grant under the Internal Revenue Code (Code)? A. Yes. The receipt of a government grant by a business generally is not excluded from the business's gross income under the Code and therefore is taxable. However, a grant made by the government of a federally recognized Indian tribe to a member to expand an Indian-owned business on or near reservations is excluded from the member's gross income under the general welfare exclusion." As I already mentioned, some are excluded because they are Specifically stated for Exemption, such as SVOG (shuttered venue) which has not even begun to be administered (SBA), as also has been announced on public radio: "23.*Will an SVOG recipient have to report the grant to the IRS as taxable income?No. The Economic Aid Act specifies that SVOGs “shall not be included in the gross income of the person that receives such grant." This grant application process starts next week. None of these funds were distributed in 2020.
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BobKamman
Level 14

"IRS states their position in that link."

No, they do not.  They refer to grants being taxable to a "business" because the guidance covers partnerships, nonprofits and corporations.  They seem to have gone out of their way not to mention self-employment tax or EIC.  

cafroning
Level 1

I have done her taxes for many years. She’s a booth rental stylist and has always filed Sch C under her social security number. 

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bd3
Level 2

I agree that even though ProSeries 1099G worksheet provides a box to link the Box 6 Grant to the Schedule C it does not flow through.to that Form.  The 1099G recipient is the business and its FEIN and not the taxpayer social security number.  It is useless to show the true recipient on the worksheet because that itself generates an error message. 

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jeffmcpa2010
Level 8

If you do not have a 1099 in the taxpayers name and SSN why would you even try entering it.

Just report the income directly on the schedule C as other income - put a description in if you want to. But there is no need to try to input a 1099 NOT IN THE TAXPAYER'S NAME ( or just about any other time either). Report the income on the correct form and move on.

 

You may wish to let your client know they are giving out the wrong information to the preparer of the 1099, and be prepared for an IRS notice to the actual recipient or backup withholding to possibly show up in the future if it is an ongoing payment stream.

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bd3
Level 2

The Schedule C is a single member LLC with its own EIN.  The 1099G Box 6 was to the LLC. The 1099G worksheet provides spaces for all of this information it just does not flow to the Schedule C with the link.

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jeffmcpa2010
Level 8

1099's to a single member LLC should be using the taxpayer's SSN not the business EIN, otherwise the IRS matching does not work. The LLC is "disregarded entity" when being reported as part of the owners tax return.

https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-compan...

provides the following (Emphasis to the last line added)

Taxpayer Identification Number

For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN.

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bd3
Level 2

The single member LLC, which has been in existence for 13 years has an EIN, 8 employees, and receives 20 or more 1099's each years from health insurance carriers, and applied for the grant using the business name and the EIN.  The Schedule C shows the EIN.  IRS has had no questions thus far.  Can't help the fact the 1099G for the grant has now been issued under the EIN.  

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qbteachmt
Level 15

@bd3 

You replied about the link problem in this other topic, as well:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/mn-grant-for-child-care...

And I answered you there (which is why making multiple posts on the same issue also makes it a bit harder for peer volunteers to follow you):

"The 1099G is issued to the company EIN."

Yes; these are Business Grants. Unless that specific grant is specifically named in some law that exempts it, it is Business income and subject to tax reporting the same as any other business income.

"Agree that the link does not work from the 1099G worksheet to the Schedule C."

And you don't try to Link it. Informational Reporting of business income can include 1099-G and 1099-NEC, neither form is entered into your business tax return, but Both of which are a part of the business income to be reported for that business.

The same thing applies even if there was never a 1099 issued at all. You still report all Business income for the business return.

 

 

"Can't help the fact the 1099G for the grant has now been issued under the EIN. "

That's not Wrong. It is a Business Grant.

 

You can do the research and follow the links, starting with the IRS link I first provided in this topic. It explains that the Grants from CARES, given to Counties and other local entities, passed from there to businesses, are Taxable for Fed purposes, with only a few exclusions which are specifically stated. For instance, Food Banks and Shuttered Venues. And your State might have different treatment. Especially this late in the year, Nonconformity has become a moving target.

From the perspective of the Software, stop trying to link box 6. The program offers no such link, last we saw. You don't need to even input that 1099-G.

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BobKamman
Level 14

Let's not make stuff up as we go along.  As the W-9 instructions state for single-owner disregarded entities, "You may use either your SSN or EIN (if you have one), but the IRS encourages you to use your SSN." Ironically, this is on the same Page (5) where IRS cautions that one way to "Secure Your Tax Records From Identity Theft" is to "Protect Your SSN."  

Many years ago the CP-2000 program could not link EIN's to SSN's.  IRS now has and uses that capability.  If my client has a choice between spreading an SSN promiscuously about the countryside, or using an EIN, I will advise protecting the SSN.  I don't care what IRS prefers: I no longer work for the government, I work for my clients.   You can tell your clients what you like, but let's at least recognize there is a choice.