In 2007 Client was hit by a business vehicle. The client submitted estimates and the business isssued a check for the clients vehicle repair. The business issued a 1099misc and marked it as "Nonemployee compensation". Would I be wrong to make a Sch C and put the amount of the 1099 misc. in the revenue section and the same amout in another section of the Sch C business expenses, thus zeroing out the income/tax. The payment was only for the repair costs.
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First I would tell the client to get a corrected 1099 for zero. Your client performed no services for the business and should not have had to receive a 1099.
Assuming that won’t work, I would enter the amount on line 21 of Form 1040 along with the 1099 EIN number, then offset it with a negative amount so that the net going to line 21 is zero. Then attach a statement that says the 1099 was reimbursed repair expenses to a personal vehicle and is not income.
Since your client does not own or operate a sole proprietorship, I would be cautious about zeroing it out on a Schedule C. I know this is the easiest and fastest way to do it, but I would only do that if your client already had a Schedule C business.
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