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@George4Tacks wrote:

@BobKamman The EA I am working with had a prior audit experience. Apparently part of the issue was the the 1099MISC with rent income was not entered in the software and the auditor could tell that. Maybe I will get nosey and see if I can look at the actual transmittal file.

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I've heard this recently but I filed it under "things I heard that probably aren't true."  I've always thought of these as a software tool to help people prepare tax returns who don't otherwise know how to prepare tax returns.  So ProSeries inherited it from TurboTax but I never thought it actually went anywhere.  I had a CPE last year where the instructor said that she always enters them "so the IRS knows she saw the 1099 and dealt with it," insisting that the 1099 info gets transmitted.  <shrug>

My (limited) understanding is that numbers in boxes on tax forms and schedules get transmitted with the return.  Also (because we can't attach them), W2s and 1099-Rs get transmitted (to help the IRS match them).  That's why we have to fill out all of the address details on those as an ERO responsibility.  Does all tax software have a 1099-MISC/-NEC "form" that you can activate?  I think there might be something in Drake but I've never used it.  I just enter the income where it's supposed to go.  C, E, fka Line 21, etc.

Getting back to the OP, we're light on facts but my first inclination is they were probably an employee (how much control did the employer have over their duties, etc.) but nobody wanted to deal with the hassle of W2s for "only" $3K.  Beyond that, maybe they just showed up for one event and got paid $3K, but it's more likely that they showed up regularly, continuously, and with the intention of making a profit.