How to Report 1099-Misc Income

How to Report 1099-Misc Income
A man is working in his home office.

Business Income on Schedule C

If you received a Form 1099-MISC for nonemployee compensation or business sales, you must complete Schedule C. Schedule C tracks profits or losses from business activities. If you work as an independent contractor for a fishing boat operator, your compensation will be listed in box 5. Any medical or health payments made to you from anyone other than an employer is listed in box 6 as nonemployee income. All other nonemployee income paid to you is listed in box 7. Sum the dollar amounts in boxes 5, 6 and 7 of all Form 1099-MISCs plus any self-employment you received that isn't included on these forms. Enter the total on line 1, Part 1 of Schedule C, entitled "Gross receipts and sales."

Schedule C Expenses and Net Profit

After entering income on Schedule C, report expenses in Part 2. You may deduct any expenses that you incurred to run your business. Most commonly, this is office supplies, health insurance and auto expenses. You can also deduct a portion of your home utilities and rent if you claim a home office deduction. Deduct the total expenses on line 28 from total income to arrive at net profit on line 31. Record net profit from line 31 on line 12 of Form 1040 and include Schedule C when you file your tax return.

Rental Income and Royalties on Schedule E

If you received rental income from real estate or royalties, you should fill out Schedule E instead of Schedule C. The only exception is if you sold real estate as part of a real estate business. In that case, report proceeds on Schedule C. Report rents from box 1 of Form 1099-MISC in box 3 of Schedule E. Royalty proceeds from box 2 of the 1099-MISC are reported in box 4 of Schedule E.

Schedule E Expenses and Total Profit

If you incurred expenses related to your rental or royalties business, report them in the expenses section of Schedule E. Landlords typically deduct property repairs, maintenance, cleaning, supplies and advertising expenses. If you received royalties from oil or gas, you can deduct expenses you incurred preparing your land for extraction. Deduct total expenses on line 20 from income to calculate total income or loss on line 41. Record this amount on line 17 of Form 1040 and include the Schedule E in your tax return.