Form 1099-MISC question?

Question

I had a client yesterday, and they rented out a snow plow to do snow removal.  They didn't do any actual snow removal themselves.  They got a 1099-MISC from the company that rented the plow, and it listed the amount as non-employee compensation.  I told them this looked more like rental income and they should speak to the company they did business with.

Is there a better way to handle this?  Or was the company correct in doing it this way?

Thanks in advance.

Anonymous · Accepted Answer

The correct way to handle this is for your client to return to the guy who rented the plow, have them reissue the 1099-Misc with the money in another box.  It's possible that the federal copy of the Misc hasn't been sent in yet.

The client should also keep all copies of their contracts--that way if the Misc doesn't get corrected, he can fight the eventual CP2000.

RiddleMeThis · Answer

"they rented out a snow plow to do snow removal"

They received the money?  Then it's income regardless of what box.  The difference is how it's reported,

Is your client a sole proprietor or is the company formed as a legal entity (LLC, corporation, etc)?  If it's an LLC reporting as a corporation or an actual corporation, it doesn't matter, the 1099-MISC is disregarded since the IRS doesn't require the reporting of payments made to a corporation.

msc · Answer

1099-MISC is the correct form, but the amount should be listed under Rents instead of Nonemployee Compensation. 

But it may not matter either way.  I believe rental income is taxed the same as nonemployee compensation.

tro · Answer

the 1099 misc is reporting pay for 'services' performed, and this definitely does not look like services

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Form 1099-MISC question?

4 Answers