Question

1099-MISC Patent Royalty Payment Issue - Turbo Tax reporting as a business?

Forum|Forum|2 years ago
February 24, 2024
1 reply
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Turbo Tax is treating my one time patent royalty payment as a rental property and business in Schedule E. I read you just need to enter the property type as a "royalty" and then enter your own address as the property address. However once I finished this form, I keep seeing inputs saying I have a business. How do I make sure turbo tax doesn't think I have a business? This section is so confusing.

DawnC

Employee

It goes on Schedule C (business income) or Schedule E (passive income) depending on the type of royalty. Both are going to require a separate schedule using your own personal address. When you enter your 1099-MISC, enter the income in Box 2 - Royalties. On the following screen, choose the source of your royalty income:

Investment income from property you own – This includes natural resources extracted from your property by a third party who leases your property, as well as royalties from intellectual property that you didn't create yourself. This gets reported on Schedule E.
Royalty income from your business, including artist royalties or operating a natural resources business (Schedule C) – This includes income from natural resources that you extract from your property as well as royalty payments from intellectual property you created as an inventor, writer, artist, and so forth. This gets reported on Schedule C.

Once you've selected the proper classification, follow the onscreen instructions.

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D

deadcowAuthor

Thank you for the response. I did exactly as you posted but Turbo Tax keeps implying I have a business with no expenses despite selecting Schedule E. How do I ensure that I'm not being penalized for having this "business" that doesn't exist?

Example:

D

DianeW777

It appears you have selected that you are receiving Royalty income from your business, including artist royalties or operating a natural resources business (Schedule C) – This includes income from natural resources that you extract from your property as well as royalty payments from intellectual property you created as an inventor, writer, artist, and so forth. This gets reported on Schedule C.

If it should be business income you will be taxed for social security and medicare taxes as well as your personal income tax.

If it should be a royalty and not business income you must indicate that when you enter the 1099-MISC. You need to select Investment income from property you own – This includes natural resources extracted from your property by a third party who leases your property, as well as royalties from intellectual property that you didn't create yourself. This gets reported on Schedule E.

Search > type royalties > Click the Jump to... Link > Complete your royalty income section (Should be on Schedule E if you are not operating a business for this payment).