How to allocate 1099k issued to Property Management Co with Property Owner income

[bracamontetaxservice]

My client is a sole proprietor and reports her business ( property management co) on a schedule c.

For tax year 2022 she received a 1099k from Buildium, LLC a Payment settlement entity. The 1099k is issued to her ein, however, it  is total income that she collected which was then transferred to each property owners account.

My Client is the 3rd party.

My client issues 1099misc to all property owners which, of course, is the same total that is listed on the 1099k that was issued to her ein.

My question is where do I report 1099 misc income given to property owners.

On the Sch C there is a space for contract labor but it can't go there.

Is it best to reconcile on 1099k worksheet?

Like, how is the best way to reconcile the income reported to my clients ein? It is over $14 million dollars and I want to make sure that it is reported the best way as to not flag her for have that as gross income?

These 1099k's ugh!

Any guidance would be much appreciated.

Thank you!

[dkh]

I'd start with - how has it been reported in past years ? 

[Terry53029]

First be sure to check box yes required to issue 1099's, and yes did file (hope she filed them on time) I would list the payments made on line 48 with a description and amount for each 1099 issued

[bracamontetaxservice]

She has been using this program Buildium (a program designed to help property managers pay their clients) for at least 3 to 4 years now and this is the first year that they have issued a 1099K with her ein.

[bracamontetaxservice]

That is where I also landed with this. I needed to get some reassurance as to what I should do or any other advice on how to report it.

With your experience do you believe having to report gross income of over $14 million and then turning around and taking that same amount as a deduction, could cause like a red flag?

[Terry53029]

Just re read your post didn't catch the amounts just thought a mom & pop operation when I replied. I would still put the amount on line 48 with description "Pass through income to property owners". and just the total amount. I wouldn't worry about red flags as that is what it is. My biggest concern is with the amounts involved on a sole proprietorship. I would think the choice of a better business entity could save them thousands in taxes.

[dkh]

I'd be more concerned it would be a red flag to NOT report the amount on 1099K as gross income.  Not sure how much 1099K matching IRS is doing but why open up the client to a CP2000 notice.

I have similar situation with some of my clients that have co-ownership in horses.  The company they sell the horses through will only issue 1099s to one of the owners.  I report the gross income from the 1099 on the return with deduction on other expense line labeled  "horse sale income paid out to co-owners".