A taxpayer may receive a taxable grant from a government agency such as the Small Business Administration (SBA) or from a nonprofit organization. The grant doesn't require repayment since it's not a loan, but the taxpayer does need to account for how the grant was used and does need to report it on their annual tax return.
If the grant relates to activity being reported on Schedules C, E, or F, or Form 4835, then it needs to be reported on the form to which it relates, otherwise it is reported as Other Income on Schedule 1.
Select the drop down menu below for instructions for the particular program year you are working in.
2021 and prior
In tax year 2021 and prior years of TaxSlayer Pro, you will need to make two or three entries related to a taxable grant:
- Enter the 1099-G indicating the Box 6 amount. This amount doesn't carry to any federal form or schedule but is used for state tax returns as needed.
- Enter the Box 6 amount in the appropriate form or schedule to which the income belongs.
- If not treated as Other Income, enter a preparer note explaining where in the return the income is being included.
Step 1: Enter the 1099-G
From the main menu of the tax return (Form 1040) select:
- Income
- Unemployment Compensation (1099-G Box 1) - Select New. Enter the payer information, then click Ok.
- Taxable Grants - Enter the amount in Box 6.
- Enter state information if it's on the form.
Step 2: Enter the grant amount where it belongs in the return
Enter the grant income in the form or schedule where it belongs.
Schedule C
If the grant relates to the taxpayer's business activity normally reported on Schedule C, include the grant on that schedule as Other Income. From the main menu of the tax return (Form 1040) select:
- Income
- Business Income/Loss (Sch C)
- Income
- Other Income
Schedule E
A landlord who receives rental payments from a nonprofit assisting tenants treats those payments as rental income. To enter these receipts in Schedule E, from the main menu of the tax return (Form 1040) select:
- Income
- Rents, Royalties, Entities - Select the property if it's there or New and enter the property information.
- Rental Income - Include the total grants with other rental payments. Consider using F10 to itemize the income for recordkeeping purposes.
Schedule F
If the grant relates to the taxpayer's business activity normally reported on Schedule F, include the grant on that schedule as Other Income. From the main menu of the tax return (Form 1040) select:
- Income
- Farm Income (Sch F) - Select the farm if it's there or New and enter the information about it.
- Income
- Specified Other Income
Form 4835
A grant from a government program or nonprofit for the rental of farmland is reported on Form 4835. From the main menu of the tax return (Form 1040) select:
- Income
- Rents, Royalties, Entities
- Part V (Including Form 4835)
- Net Farm Rental Income/Loss (Form 4835) - Select the farm activity if it's there or New and enter a description of the activity.
- Income
- Other Income
Other Income
If the grant is unrelated to a taxpayer's business, enter it as other income. From the main menu of the tax return (Form 1040) select:
- Income
- Other Income
- Other Income
- Other Income - Select New, enter a description and the amount.
Step 3: Enter a Preparer Note
From the main menu of the tax return (Form 1040) select:
- Miscellaneous Forms
- Notes / Statements
- Preparer Notes - Select New. Enter a note explaining how the Form 1099-G taxable grants are being handled in the return.
2022 and forward
In 2022 and subsequent years of TaxSlayer Pro, if the taxable grant doesn't relate to Schedule C, E, F, or Form 4835, enter the Form 1099-G in its menu. The amount in Box 6 for Taxable Grants will flow to Schedule 1 as Other Income. Make this entry using the instructions in Step 1 below.
On the other hand, if the income needs to be entered in Schedule C, E, F, or Form 4835, you won't enter the 1099-G in its menu. Rather, you'll make these entries as outlined in Steps 2a, 2b, and 2c below:
- Enter the Box 6 amount in the income section of the appropriate form or schedule to which the income belongs.
- If federal tax was withheld, enter it in the Payments menu.
- Enter a preparer note explaining where in the return the income is being included.
Step 1: Enter the 1099-G
From the main menu of the tax return (Form 1040) select:
- Income
- Unemployment Compensation (1099-G Box 1) - Select New. Enter the payer information, then click Ok.
- Taxable Grants - Enter the amount in Box 6.
- Enter state information if it's on the form.
Step 2a: Enter the grant amount where it belongs in the return
Enter the grant income in the form or schedule where it belongs.
Schedule C
If the grant relates to the taxpayer's business activity normally reported on Schedule C, include the grant on that schedule as Other Income. From the main menu of the tax return (Form 1040) select:
- Income
- Business Income/Loss (Sch C)
- Income
- Other Income
Schedule E
A landlord who receives rental payments from a nonprofit assisting tenants treats those payments as rental income. To enter these receipts in Schedule E, from the main menu of the tax return (Form 1040) select:
- Income
- Rents, Royalties, Entities - Select the property if it's there or New and enter the property information.
- Rental Income - Include the total grants with other rental payments. Consider using F10 to itemize the income for recordkeeping purposes.
Schedule F
If the grant relates to the taxpayer's business activity normally reported on Schedule F, include the grant on that schedule as Other Income. From the main menu of the tax return (Form 1040) select:
- Income
- Farm Income (Sch F) - Select the farm if it's there or New and enter the information about it.
- Income
- Specified Other Income
Form 4835
A grant from a government program or nonprofit for the rental of farmland is reported on Form 4835. From the main menu of the tax return (Form 1040) select:
- Income
- Rents, Royalties, Entities
- Part V (Including Form 4835)
- Net Farm Rental Income/Loss (Form 4835) - Select the farm activity if it's there or New and enter a description of the activity.
- Income
- Other Income
Step 2b: Enter the tax withholdings
If the federal tax was withheld on the Form 1099-G, enter it in the Payments menu. From the main menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Other Federal Withholdings
- Form(s) 1099 Tax Withheld - Enter the amount withheld.
Step 2c: Enter a Preparer Note
From the main menu of the tax return (Form 1040) select:
- Miscellaneous Forms
- Notes / Statements
- Preparer Notes - Select New. Enter a note explaining how the Form 1099-G taxable grants are being handled in the return.
Note: This articles provides navigational guidance for entering taxable grants in the TaxSlayer Pro program. It is not intended as tax advice.