Question

1099-G California Business Relief Grant - How to report? 1040 or Schedule C?

Forum|Forum|4 years ago
March 19, 2022
1 reply
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I read that this can be reported on 1040 as "other income" but that some people are reporting it on Schedule C before deductions. I'd like to confirm that the latter would be ok, since it would be a great advantage. And if that's the case, are there any limitations. For example, a friend of mine did not operate much in the year 2021 and his earnings are less than the $5000 grant he received but from this business. He has not abandoned his business.

Not A Product Question

KrisD15

Yes, on Schedule C is where it should be reported.

If it was issued as a "Business Grant" enter it as business income.

You will need to pay Self-Employment tax on the profit it may generate, and you may also be eligible to get the Qualified Business Income Deduction

For California, you will subtract that amount out of your income.

Please see the linked answer for more details:

TurboTax Linked Answer

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N

nkerioAuthor

Thank you for your reply, I know what to do. I have a follow up question for a friend of mine. So he received the grant based on him being in business since 2019, but hasn't done business 2020, and in 2021 he did very little business in October, November, December. He claims part of his rent as he tutors from home, but he he could only manage to tutor about 4 times a month, so let's say about 12 times in total. This is where it gets confusing. How much rent should he deduct. In terms of area of his office, it is 25%. So can he deduct 3 times 25% of his rent? Or because he didn't work on a daily basis, he is not able to deduct that much? The rules are really open to interpretation because the IRS does not mention hours, days worked etc. For him, he might be better off just reporting it as "Other income" on 1040.

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DianeW777

It depends. In the scenario you described regular and exclusive use does not apply. Have your friend review the details at the links provided to make final determination.

Generally speaking, to qualify for the home office deduction, you must meet one of these criteria:

Exclusive and regular use: You must use a portion of your house, apartment, condominium, mobile home, boat or similar structure for your business on a regular basis. This also includes structures on your property, such as an unattached studio, barn, greenhouse or garage. It doesn't include any part of a taxpayer's property used exclusively as a hotel, motel, inn, or similar business.
Principal place of business: Your home office must be either the principal location of your business or a place where you regularly meet with customers or clients. Some exceptions to this rule include day care and storage facilities.
- For more information click this link: Home Office Deduction
- IRS Publication 587

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