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Hello, In order for your dad to claim the income you have to send him a 1099 K. This type of transaction would be considered a "nominee/middleman" situation. You file the 1099-MISC and 1096 and then your dad would report the income. In response to the IRS, you would send a letter explaining the facts and then a copy of the 1099MISC you sent to your father/IRS.
Please let me know if you have any questions before you rate my answer. A positive rating is what I strive for. Regards Dave
Hello and thank you for your question.
You do not have to file a 1099-Misc showing payments to your dad. The tax code does not require information reporting in order to be able to properly claim income and deductions (IRC 61). You simply need to properly report income and deductions regardless.
Your situation is actually quite common with lawyers and doctors who often do business as corporations, where the corporations recognize the income, but 1099's get erroneously issued to the individuals instead of the corporations.
If you did file a 1099-Misc, then you would have to e-file by the end of March or face a late filing penalty, so this will cost you money either way if you file a 1099.
Your situation is the result of a bad information return (ie... a bad 1099). It should have been issued to your dad according to what you say. The proper fix is to have them re-issue the 1099 with your dad's information and leave you out of this all together.
In order to file your tax return and avoid an IRS notice, report the 1099 on your return. The amount should show as earnings on line 1 of Schedule C. Also on Schedule C, show a matching refund amount on line 2 and include a statement indicating that the money was earned and reported by your dad (use line 2 on Schedule C, and not an expense line, to avoid potentially impacting other calculations on your tax return). Include your dad's social security number.
By doing the above, your income on Schedule C should be $0 but at the same time you will have reported the 1099. This way, the IRS computer can match the 1099 amount and not flag your return for a potential error (the IRS also received a copy of the 1099).
I hope this is helpful.