Reconciling 1099-K variance on 1065

Forum|Forum|1 year ago
February 3, 2025
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I received a 1099-K for my rental property business that included funds received for a security deposit. As a result, the 1099-K income is higher than the rental income I will report on the 1065. Is there a way to reconcile/explain this variance on my 1065 to avoid an IRS red flag? I am using TurboTax Business desktop version.

TurboTax Business Windows

PatriciaV

Employee

A security deposit should not be included in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.

If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Include it in your income when you receive it.

Follow this post from Expert JohnW152 for the steps on how to report Form 1099-K in TurboTax Business, including an adjustment (if needed) for the security deposit.

See this TurboTax article for more information: TurboTax: Rental Real Estate and Taxes - Security Deposits

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