Self Employment Taxes on Taxable Grants reported in box 6 of Form 1099-G

[marty2]

Taxpayer, using his LLC EIN, applied to the Wisconsin Economic Development Corp for a grant and received $2,500.  The $2,500 was reported to the taxpayers LLC on form 1099-G in box 6 entitled taxable grants.  ProSeries links box 6 (taxable grants) of Form 1099-G to Schedule 1, Additional income, line 8 Other Income bypassing Schedule C and thus avoiding Self Employment Taxes.  Interestingly on line 8 of form 1099-G ProSeries asks if the amount reported in box 2 (state income tax refunds, credits or offsets) applies to income from a business and if so links box 2 to line 6 (other income) of Schedule C thus subjecting it to Self Employment Taxes.  

Question - Are taxable grants reported in box 6 of form 1099-G exempt from Self Employment Taxes or does Intuit need to fix their software and link box 6 to Schedule C line 6 (other income)?

Thanks

MRH

[qbteachmt]

Here's the IRS topic:

https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions

The income would be offset by the appropriate and specific costs incurred for the narrow purposes of these grants. That makes it regular taxable income reported as usual as business income. It's supposed to cover extraordinary costs incurred to respond to the pandemic for that business to reduce the impact to that business.

[AKGlover]

How did you end up entering this in ProSeries?  The software is not working correctly for me, it will not link to Sch C as you mentioned in your original post.

[jeffrey]

The person, and myself as well is looking for the software issue, not what a taxable grant is about.

Client LLC received grant from city, (taxable). on the Schedule C I click on the "1099-G" I enter the information on a 1099-G worksheet. Including checking line 8 and 8a (link to Sch C line 6). The check mark errors red and the money does not go to shch c as it shoudl, but instead shc 1 as other income.

Also the software will not allow (without error) to put in the EIN of the Sch C business.

We need the amount off Sch1 and onto Sch C where it belongs.

[qbteachmt]

@jeffrey 

"The person, and myself as well is looking for the software issue, not what a taxable grant is about."

That's not what they asked. They have a Question: "- Are taxable grants reported in box 6 of form 1099-G exempt from Self Employment Taxes or does Intuit need to fix their software and link box 6 to Schedule C line 6 (other income)?"

However, I searched for you and found this topic:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/mn-grant-for-child-care...

[jeffrey]

The software as others have reported is not working properly.

The grant goes on Schedule C. The software errors saying it is only for box 2 unemployment. This is a box 6 Taxable Grant.

You are incorrect in saying a 1099-G is only for unemployment and tax refunds. they are the most common, but not the only one things they are for, they are for many types of government payments.

I am hoping an Intuit employee see this and fixes the software. They say they don't want us calling. but this is a waste of time. And tells us it is fixed.

[qbteachmt]

"You are incorrect in saying a 1099-G is only for unemployment and tax refunds."

I never stated that, though. Are you mad at the right people? Because you seem mad at your peers that are trying to be helpful to others. And at that link I provided, they point out to put it into the Sched C values.

"

So this form is not linked to the IRS computers yet?  Because the 1099 NEC is.  thanks!

I think you may be confusing what happens with 1099NEC within the tax program and what IRS does with 1099NEC mailed in with F1096.     Yes IRS does match the mailed in Form 1099s (MISC, INT, NEC, G, etc) with tax returns.    No IRS does not match the 1099s that have been entered in the tax program with what's been mailed in. "

Perhaps you should start your own topic, to get the attention of other peers. Although, you will likely see some of those same people still trying to be helpful.

Good luck.

[sjrcpa]

Can't you just include it in Sch C income and skip any 1099-G specific input?

[jeffrey]

Dude,

first of all I am not mad at you or anyone. You are jumping to conclusions and wrong.

2nd now you are talking about 1099-NEC I never mentioned this, 

Please stop trying to look like you are someone great, you are no better than any of the rest of us. 

Have a great day. No need to reply, as I am busy working. I am reporting a software bug. And apparently attracted a fly.

[jeffrey]

Well, my thought is with E-file and matching. The 1099-G has the EIN of the business, not the tp SSN, second, the software is making an error when we are in fact entering correctly. 

[qbteachmt]

"2nd now you are talking about 1099-NEC I never mentioned this,"

Not Me.

It's a Quote, from the other topic, where your possible solution is just include it as business income.

As @sjrcpa also suggested.

[qbteachmt]

"my thought is with E-file and matching."

Which is in the Quote I provided.

[M Gibson]

Self-Employment (SE) Tax is separate from income tax. It is the self-employed version of Social Security & Medicaid. So your answer is correct for income tax, but doesn't address SE tax. It's a tough question, and I am still looking for a definitive answer!

[qbteachmt]

@M Gibson 

"It's a tough question, and I am still looking for a definitive answer!"

No, it's not a tough question. It's very clearly addressed.

The IRS will tax it as business and that is Ordinary Income and that includes SE tax. The State either taxes it as Business, too; or exempts it specifically for their purposes and that will be codified in their regulations, which have been posted on the web.

The nontaxable grants of this nature, which are CARES funds passed down to businesses through Fed, County, Local governmental entities, Agencies, USDA, etc, that are exempt will be specified. One I have been following is Shuttered Venues, but even on the radio they announced none of those funds were paid out in 2020. Another is HVAC improvements. When your county health department gives grants to local medical clinics, that is another example of a grant that might be on the State's list as Exempt from tax. Food Banks also got these grants. But farmers through USDA were given taxable grants. And on this forum, there are questions regarding fishermen grants that were give that were based on foreign tariffs, not coronavirus. Same type of disbursements, different basis.

Yes, it is specifically addressed. No, it's not Tough to find.

If you need help doing that research, you are going to need to provide some details, of course.

Here is the Fed link:

https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions

Here is the MT link: https://mtrevenue.gov/2021/01/25/covid-business-grant-income-taxable-in-montana/

Here is the list of MT grants I have been following for over a year: https://commerce.mt.gov/Montana-Coronavirus-Relief/Awarded-Grants

[jeffrey]

The whole basis of the thread, appears that ProSeries asks you to identify that the grant was issued to a self employed person (company). The schedule C has place to report it that cross references to 1099-G. Then the software errors out. 

There is a software issue, not a tax issue imho.

[qbteachmt]

This was answered March 6:

"Can't you just include it in Sch C income and skip any 1099-G specific input?"

You cannot link box 6 to the Sched C. You don't need to link them. Just like you don't need to input every 1099-NEC.

You need to include the income as business income.

[simplicity]

Me too. Makes a big difference where you put it on the tax return. Intuit takes it to other income not subject to employment tax but its more reasonable to be put on Sch C or Sch F.  Still looking for answers

[qbteachmt]

Intuit doesn't "take it" anywhere. You enter it appropriately.

You don't want to link a 1099-G for a business grant, as if that is a Refund. The ProSeries program only wants to link a Refund 1099-G.

"Still looking for answers"

It's right here in this topic: "You don't need to link them. Just like you don't need to input every 1099-NEC.

You need to include the income as business income."

"but its more reasonable to be put on Sch C or Sch F."

Well, if it is related to a Sched F activity, you enter it on the F. If that is related to a Sched C activity, you put it on the C. If that is a Partnership issue, you put it on the 1065. If that is Corporate, well, you get the idea.

[simplicity]

Thank You.      that makes reasonable good sense

[HOPE2]

Hi, how about CA return? I mean it is taxable for federal but not taxable for state. So, we need to make an override on section B, line 3 on schedule CA and do we need to make double click on it to make description. I am new with Proseries. I need help to find it out.

Thanks for helping.

[qbteachmt]

@taxcredit 

Your own topic is here:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/grant-5000-lendistry-in...

You don't need to keep asking by posting in old topics. You should read it again, because we addressed Sched C there. You should keep to that one topic, and not post in this topic from the prior tax year, because the program for preparing 2020 taxes will be different than preparing 2021 taxes. This topic is from the prior tax year. You can see that the latest reply is May 2021. Thanks.

[HOPE2]

Hi, how about CA return? I mean it is taxable for federal but not taxable for state. So, we need to make an override on section B, line 3 on schedule CA and do we need to make double click on it to make description. I am new with Proseries taking time to understand what is the procedure, sorry .I need help to find it out. Also I did not find latest reply for May 2021, may have the link.

Thanks for helping.

[qbteachmt]

"Also I did not find latest reply for May 2021"

This topic, where you just replied with a new tax question, has only May 2021 and older replies, because it relates to the tax program for preparing 2020 taxes. You cannot keep asking new year questions in old topics, because the programs and the tax regulations have changed.

You started your own topic, specific to your own issue. Instead of asking in multiple old topics, just stay with Your Topic, and you get Your Answers, from the peers that volunteer to help on this internet forum.

You would not walk through a crowd asking everyone the same question. That's what you do when you put your reply in multiple existing old topics. Same thing, except on the internet.

Asking as your own question means you already have everyone's attention. When someone can answer, they will answer. This is not Customer Support or Tech Support. This is peer users.

[HOPE2]

Thanks for understanding, as I told you, I am new and I did not know about old topic and new topic so that  keeping on new topic. Again thanks. Help me to get my answer regarding CA adjustment, my last reply.

Greatly appreciate this community like always.

[qbteachmt]

@HOPE2 

Go to your own topic, this link:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/grant-5000-lendistry-in...

Put in any update info there. Keep using your own topic for your own purposes, for that same issue.

[pearl007]

Did you ever find out if a  taxable grant reported on a 1099G could be claimed on a schedule C 

[sjrcpa]

@pearl007 That wasn't the question.

Of course a taxable grant to the Schedule C business can and should be reported on the Schedule C.

[jeffrey]

After years of colleagues telling me to dump Pro_Series I finally did and I am now so happy I did and should have done it years ago.

The ProSeries errored out when trying to put it on Schedule C

[qbteachmt]

"Did you ever find out if a taxable grant reported on a 1099G could be claimed on a schedule C "

The amount gets included in the gross for that business using the Sched C. The grant that was for the business makes it part of business gross.

It isn't Linked.

It is reported as part of ordinary business income, unless you have the specific regulation or code that exempts it.

All of this is explained in this topic, and nothing about this has changed.