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Dealing with Errors in Form 1099

Posted by Brandon Keim | Sep 30, 2022 | 0 Comments

There are many reasons you might receive a Form 1099 during a tax year—from working as an independent contractor to selling real estate or receiving interest on a savings account. But no matter the reason, what if the information on your 1099 is wrong? Dealing with erroneous 1099s is important and worth your while.

First, experts recommend that you review your 1099 as soon as you receive it, and companies should be issuing them no later than January 31. Usually, companies will submit copies to the Internal Revenue Service (IRS) and you simultaneously.

Common errors include an incorrect amount paid, an incorrect taxpayer ID number, or an incorrect address.

Another frequent error to watch out for: If the payor issued the wrong 1099 form. For example, as of 2020, self-employed independent contractors should receive a 1099-NEC, but others should get a 1099-MISC. If you mistakenly get the new NEC form when you should have received the MISC, that could have a huge impact on your tax liability. That is because the NEC form signals to the Internal Revenue Service that you should be paying self-employment tax in addition to income tax.

If there's an error, the payor must provide you with a corrected copy, and they must submit a corrected form to the IRS. (Make sure the box for a corrected report is checked so the IRS doesn't use both forms to determine your income.) This should be done as soon as possible so you can avoid having to file a corrected return.

While there's technically no hard and fast deadline for correcting a 1099, you must submit a corrected return within three years of when you filed the original return or within two years after you paid the taxes.  

But what if the payor refuses to correct the form?

It's the payor's responsibility to issue a correct form. If they don't do so, you can sue them for damages. Under section 7434 of the Internal Revenue Code, when someone knowingly provided wrong information in the 1099, they can be liable to you for $5,000 or the actual damages plus attorneys' fees and costs—whichever's greater.

If you have questions about your 1099s or related tax issues, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.


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