Land Sale Reported On 1099MISC

[joanmcq]

Dany, veritas is right; this is in a CDP hearing. You don't have to worry about matching; this is going to be processed by a human being who can read an attached statement. What you are doing is filing to negate the SFR that has already been filed by the IRS, and the notices that have been ignored by the taxpayer to the point that he is at the stage of a CDP hearing. Just report the income properly on the D, and explain why it isn't on a C with the return. Its very likely you will be having a conference with the CDP officer anyways.

Avoiding matching issues is something we do if we want to avoid an audit based on inaccurately reporting info. This one is way, way past that issue.

[FEDUKE404]

Source of old IRS forms

....My client said that their accountant could not believe I still had 1099s from that far back. I said "well you see... you never know when you might need them".

You should have shown this to the accountant:

http://www.irs.gov/formspubs/article/0,,id=98339,00.html

FE

[geekgirldany]

Developer blamed it all on the accountant. "I don't know, the accountant handles all that".
So yeah I would not mind talking to the person that filed that form. Developer told client to call the accountant but due to privacy reasons of course he could not get anywhere. The chance they would change it five years later would be slim. So I'll get this and the other returns completed correctly.

I had one client that was issued a 1099-misc under his name. Someone else had filed the return and did not catch it. It was back in 2006. IRS sent letter.
Large corporation issued it. Accountant there said "We would change it if we had the forms but we don't and we can't get them." I told my customer I still had the forms. That I have blank 1099s going back to 2000. He asked for some blanks for that year, took them to their accountant, and a corrected one was sent in.

My client said that their accountant could not believe I still had 1099s from that far back. I said "well you see... you never know when you might need them".

[WhiteOleander]

.... I would love to ask the preparer of the Form 1099-MISC how it was determined that the income from the sale was (apparently) deemed to be "non-employee compensation" in the first place!

FE

My experience with the folks that do this is they don't read the 1099 MISC instructions and fill it out anyway. Their train of thought is "Well, the person was compensated by our company and he/she is not an employee so obviously it belongs in this box."

[FEDUKE404]

Also....

I am assuming that the IRS has prepared a return for your client. If this is accurate, you should prepare and file one, ASAP. You should show the land sale on Schedule C and make a corresponding deduction to move it to Schedule D. You should attach a detailed explanation as to why you are doing this and I would include any documentation to prove that the 1099 is in error.

.... I would love to ask the preparer of the Form 1099-MISC how it was determined that the income from the sale was (apparently) deemed to be "non-employee compensation" in the first place!

FE

[Kram BergGold]

Here is wha tyou should do

I am assuming that the IRS has prepared a return for your client. If this is accurate, you should prepare and file one, ASAP. You should show the land sale on Schedule C and make a corresponding deduction to move it to Schedule D. You should attach a detailed explanation as to why you are doing this and I would include any documentation to prove that the 1099 is in error.

[geekgirldany]

Thank you veritas and FE. I really appreciate yours and the others postings on this matter.

Looks like the majority that posted on this agree to put it on Schedule D and do not use a Schedule C. I've used a Schedule C before for matching purposes when the 1099-MISC was put in the taxpayer id and not in biz (S-Corps). Only done it when it was impossible to get the issuer to change it.

This was a new one for me and it being from 2005 made it even worse. So I will report on Schedule D and include a letter with supporting documents on the land sale and 1099Misc mistake. FE that is a good suggestions on putting it on line 21.


Now only three more years to do after this one First one I have done in awhile that has had so many years passed due... and is actually working with me to get the returns completed. I guess a lien will do that.

Thank you all again
Dany

[FEDUKE404]

Simplest solution

If you are content with the correct amounts that should show up on Sch D, I would proceed with all due haste taking that route.

Since the return is likely to get scrutinized anyway, why not just attach a simple statement to the return stating something to the effect "Gross proceeds from sale of land as reported on Sch D were erroneously reported on a Form 1099-MISC" and perhaps attach a copy of that document?

Most tax software also has a built-in worksheet with various entries for line 21 of Form 1040, so you could also choose to enter the Form 1099-MISC number there and at the bottom enter the same as an offsetting negative number and say something like "documentation error - transferred to Schedule D."

As for the Sch C stuff, there are those on these boards who never put any "not in business" stuff on a Sch C in the first place!

FE

[veritas]

I would complete the return

correctly. Get it in quickly.

This is past the matching stage. My best guess the return will be accepted as filed.

They want your client to get current.

[geekgirldany]

Yep we were typing at the same time Saw your response after I hit the reply button.

Thanks
Dany

[newbie]

1. How did you ever conclude the income was "wrong" albeit perhaps not reported in the proper manner??
Sounds like the income was right but reported on the wrong form.

2. Why are you averse to reporting it on a Sch D (most likely correct place) and simply proceeding??
Sounds like it's reported and deducted on schedule C to zero out 1099MISC and then correctly reported on schedule D

3. Does the client really think such continued evasive maneuvers will change anything with the IRS overall re a 2005 tax return with apparent unreported income??
Why do you say the income will be under reported??

Edit: Oops - must have been typing at the same time. Geekgirldany, I think you are on the right path.

[geekgirldany]

1. How did you ever conclude the income was "wrong" albeit perhaps not reported in the proper manner??

2. Why are you averse to reporting it on a Sch D (most likely correct place) and simply proceeding??

3. Does the client really think such continued evasive maneuvers will change anything with the IRS overall re a 2005 tax return with apparent unreported income??

FE

I must have worded my post incorrectly.

1. By "wrong" I was meaning the land sale was reported incorrectly on a 1099-MISC. So yeah it was "wrong" to report it on that form it should have been reported on a 1099-S.

2. I would of course report the land sale correctly on Schedule D. I was speaking of others suggestions to reporting the 1099-MISC on a Schedule C and then deducting it back off on Page 2 of Schedule C and including an explanation of where it will be reported. Which is a Schedule D.

3. Client is not doing any evasive maneuvers. Not sure how you concluded that. He knows the income from the land sale must be reported. I am trying to figure out the best way to report a land sale that was put on a 1099-MISC instead of a 1099-S.

My thought is that by doing as I said in #2 it would help get the return processed quicker and would also go through the IRS matching program as far as the incorrect 1099-MISC. The quicker the return is processed the more likely they will not levy any assets.

[FEDUKE404]

Three questions

Had CDP Hearing today and because client received statutory notice of deficiency back in 2008 doubt as to liability could not be raised. So the lien is staying in place. She said she was not in the position to discuss the 2005 tax return (the 1099Misc problem) to just get the return in asap.

Now levy action will be coming soon. She said he would receive a letter. To my understanding this will be a 30 day levy action letter the client will receive.

How long will it take for this levy action notice to be sent? Trying to give my client an expectation on this.

I am also considering TaxxCPA and Jesse advice on the Schedule C for the wrong 1099MISC. I am thinking if I prepare the return showing the 1099 MISC with the Schedule C and then take it back off. Then this might speed up the processing progress of the tax return.

Wish people would just file on time.

1. How did you ever conclude the income was "wrong" albeit perhaps not reported in the proper manner??

2. Why are you averse to reporting it on a Sch D (most likely correct place) and simply proceeding??

3. Does the client really think such continued evasive maneuvers will change anything with the IRS overall re a 2005 tax return with apparent unreported income??

FE

[geekgirldany]

Levy Action

Had CDP Hearing today and because client received statutory notice of deficiency back in 2008 doubt as to liability could not be raised. So the lien is staying in place. She said she was not in the position to discuss the 2005 tax return (the 1099Misc problem) to just get the return in asap.

Now levy action will be coming soon. She said he would receive a letter. To my understanding this will be a 30 day levy action letter the client will receive.

How long will it take for this levy action notice to be sent? Trying to give my client an expectation on this.

I am also considering TaxxCPA and Jesse advice on the Schedule C for the wrong 1099MISC. I am thinking if I prepare the return showing the 1099 MISC with the Schedule C and then take it back off. Then this might speed up the processing progress of the tax return.

Wish people would just file on time.

[geekgirldany]

Thank you all for responding. I've been away from the office the last two days. This was a land sale reported on a 1099MISC on line 7 NonEmployee Compensation. My client is not in the real estate business.

Taxxcpa was suggesting the Schedule C just to report the 1099MISC and then show it as an expense to comply with the IRS matching rules. But as Snag said the horse if out of the barn and I also think this can not be done.

As I said this was not a business for my client. A large subdivision was built very close to his home. They wanted his shoreline so that the subdivision people could dock their boats there. The developer also purchased two other folks shorelines.

I believe Gary hit the nail on the head. My client will have to get an appraisal done for the shoreline. The 1099MISC he received has that it was for "property" and gives the address. Plus I have a checkstub that also states the address and that it was for the shoreline. I am hoping that is enough.... but then we will be looking at getting the basis on the shoreline.

thank you all for your help
dany