ICFiles
SOC 2

CPA Website Content

Secure File Transfer Soc 2 starts at $1 per month

Join Us

 

 
Financial Calculators
Financial Calculators
 
Federal Tax Links
Federal Tax Links
 
Financial Terms Glossary
Financial Terms Glossary
 
Cartoon of the Month
Cartoon of the Month
 

Wait a Minute - My 1099 Doesn't Look Quite Right

Tax and Financial News

March 2017

Buy

Wait a Minute - My 1099 Doesn't Look Quite Right

how to fix my 1099The rules around Form 1099s are long and can be complex. So what are you supposed to do if someone sends you a 1099 that doesn’t look quite right? Perhaps they made a mistake and put an extra zero on it, taking your income from $2,000 to $20,000! Worse yet, what if it looks like they intentionally put down the wrong amount? Mistakes and fraud both happen, and we will look at how to handle each situation below.

First, let’s start by understanding why 1099s are so important. They are sent out by payors to both you and the IRS. They act as your record of the interest, fees or other income you earned that year. The types of 1099s include:

Since these forms go to both the IRS and you, the IRS will match up any 1099s they receive as sent to you against what you report on your return when you file. Failing to report a 1099 all but guarantees you will receive a tax notice.

Unfortunately, incorrect Form 1099s are not uncommon. The first thing you should do if you know or suspect the 1099 you received isn’t right is to ask the payor to correct it. If they haven’t sent the corresponding copy to the IRS, then they can simply destroy it and reissue a new one; if they’ve already sent it to the IRS, they can issue a corrected version. Remember that 1099s are supposed to be mailed out to recipient taxpayers by Jan. 31, but issuers have until the end of February to send the IRS their copy. So if you check your form and act promptly, it can potentially save you a lot of hassle.

The type of error also matters. If you don't get a 1099 at all, for example, you can simply report all the income since over-reporting income doesn’t create a “mismatch” issue with the IRS. The IRS’ only concern is people trying to hide income – never the opposite.

Be extra careful if you contact the payor to issue a corrected 1099 or because you didn’t receive one you think you should have. They could end up issuing two 1099s to you and the IRS because of timing overlap between the original issuance and your request to correct. If this happens, the IRS’ computer system will think you have double the income you actually do.

At this point, you are probably thinking, “Wow! This is a lot of work on my part for someone else’s mistake.” If so, you are correct. And the IRS agrees with you, so they created penalties for 1099 issuers to ensure they are timely and accurate. However, this is not the IRS’ main motivation for these rules. Most penalties apply to failures to issue the forms since the most important thing to the IRS is that no one can skip out on reporting income. Issuers have little motivation to not issue a 1099 at all as well since this helps substantiate expenses and deductions.

In the end, the best thing you can do is to check out your 1099s as soon as you receive them to make sure they are accurate – and contact the issuer right away if they are not to avoid the IRS receiving double 1099s. Also, remember that you can always over-report income above and beyond a 1099 received or never received at all if the error falls that way.

Buy

 

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

Protected by Copyscape Plagiarism Finder

Dynamic Content Powered by Service2client.com
SEO Content Powered by DynamicPost.net

ICFiles
SOC 2

CPA Website Content

Secure File Transfer Soc 2 starts at $1 per month

Join Us

 

CPA Website Content

 
 
Financial Calculators
Financial Calculators
 
Federal Tax Links
Federal Tax Links
 
Financial Terms Glossary
Financial Terms Glossary
 
Cartoon of the Month
Cartoon of the Month
 
websites for cpas

MyWeb, WordPress Joomla, Drupal
1 Click Hosting
Install free themes

websites for cpas

Click

 
Tax Calendar
Tax Calendar
 
State Tax Links
State Tax Links
 
Track your Refund
Track your Refund
 
Library Articles
Library Articles
 
 
 

CLOSE