Box 1 Rents:
- In-scope only for a land lease or a gas/oil lease.
- These entries flow to Schedule E.
- No expenses can be claimed except property taxes.
- One exception: A personal home rented for less than 15 days is in scope.
- If no 1099-MISC was issued for the rental, do not report the income.
- If a 1099-MISC was issued, report the income as 'Rents' on the 1099-MISC, then enter the same amount on Schedule E, Line 19 as "less than 15 days exclusion."
- NO OTHER RENTALS ARE IN SCOPE.
Box 2 Royalties:
- If royalty payments are for oil/gas production, having them in 1099-MISC Box 2 is correct (which flows to Schedule E).
- If royalty payments are a result of self-employment (writer, singer, song writer, patent holder, etc.), they should be in 1099-MISC Box 7, Nonemployee compensation (which flows to Schedule C).
Box 3 Other Income -vs- Box 7 Nonemployee compensation:
- Box 3 is for income from an activity in which there is no continuing relationship with anyone or any company, and there is no expectation of ever doing it again.
(Example: An honorarium for giving a speech.)
- Box 7 is for income from self-employment, or an activity in which there is a continuing relationship with a person or a company, and there is an expectation of doing that activity again.
(Example: Giving piano lessons.)
Update Feb 26, 2018: (email from Mirta)
We have come across several 1099-MISC with an entry of approximately $17 in box 7. This is from the distribution of some kind of "Legal Fund". (The first one I saw was from GM, but then I came across one from another company.)
Move the $17 to box 3. We do not need to generate a schedule C for this one.