Correcting 1099-Misc Statements for Nonemployee Compensation
"One of our independent contractors received a 1099 for more than what he actually earned from us. We were supposed to issue him a new 1099 but the person who does that is not in today... and he has to have it by monday for his tax accountant. What should he do??? Should the tax accountant go ahead and file with the inflated amount and make an adjustment later....or what? HELP!!"
Initial answer:
Is the company definitely going to issue him a corrected Form 1099-MISC?
Follow up response:
"Yes, as soon as the person comes back on Monday. No one here knows how
to access the 1099 module in the system."
Basically, the contractor should file an extension, and then prepare his tax return using the corrected Form 1099-MISC. If the contractor thinks he will owe the IRS, he should prepare a draft tax return using all the information he currently has about his business income and expenses, and mail the IRS a check for the amount he estimates that he owes. That payment should be made using Form 4868, the request for an Automatic Extension of Time to File.
He should then revise his tax return using any corrected information he receives about his income before filing his return.
Although this will take extra time now, he should file only when the return is accurate and complete, that way he will have confidence that he is paying the right amount of tax.
Additionally, the corporation may have to pay a penalty for failing to report the correct amount of income on Form 1099-MISC. The penalty is $15 per incorrect 1099 if the corrected 1099 is filed within 30 days of the original deadline for filing Forms 1099 and 1096 with the IRS. The penalty rises to $30 per incorrect 1099 if the correction is filed by after 30 days but before August 1, and $50 per incorrect 1099 if the correction is filed after August 1. The IRS will waive the penalty if the corporation can show reasonable cause. For more information, see the Instructions for Forms 1099, Failure To File Correct Information Returns by the Due Date. The IRS also provides instructions on how to file corrected 1099 forms.
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i received a 1099 that grossly overstated my compensation and I believe it was done intentionally. It also may have accured in the last 2 tax years. What should I do ?
Ask the company to send you a corrected Form 1099-MISC. If that fails, report your income based on the records you have of their payments to you. For example, you might have invoices or bank deposit slips. If there’s a mis-match between the amount of income you report and the amount of income that the company reported to the IRS, then the IRS will audit your tax return. Simply provide the auditor with documentation for how you calculated your business income, and inform them that the 1099 was incorrect. Then the IRS may audit the company.
I am a computer consultant who sells software and hardware along with providing support. I immediately resell these goods to the customer and carry no inventory. I include the profit on goods in my gross revenue. Every year I get 1099-misc forms showing the sum of my support services and the customer’s purchase price of these goods combined in Box 7, non employee compensation. I know this box should only be compensation, not goods. But getting people to correct this is next to impossible. What can I do to avoid trouble with the IRS for showing much less income than these 1099’s make it appear I make?
Bump for above,
I am receiving 1099-misc forms with the total amounts for products and services for customers that I carry ‘on-account’. These customers have been invoiced and recorded in gross revenue. What should I do about the 1099’s?