How do I report 1099-K income that was actually used to pay bills

Forum|Forum|4 years ago
April 4, 2022
1 reply
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I got an adjusted return from the IRS for $38K on a 1099-K from Square. The transactions were actually from my own business credit cards in order to get cash to pay off other cards. Is there a way to amend and report the $38K in a manner that it doesn't truly show as income?

TurboTax Self Employed Online

J

JamesG1

I think that you are saying that the IRS is questioning why the full $38,000 of 'income' reported by Square is not reported on your 2021 Federal 1040 Schedule C Profit and Loss from business. Is this correct?

If so, are you:

Able to report the full amount of the $38,000 as income to the Schedule C, then
Add an expenditure line called 'personal expenditures' or some accurate description of why this amount is a legitimate reduction from the business income?

So a Schedule C may look like this:

1099-K income $38,000

'Personal' 5,000

Business expenses 20,000

Profit $13,000

This method presumes that, should it be required by an IRS audit, you are able to demonstrate to the satisfaction of the IRS the character of each dollar of the $38,000 1099-K income.

See here for how to amend your 2021 Federal tax return.

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