Incorrect Misc 1099

Question 1:

 

1 : Hello. I worked as a freelancing consultant for a company. I earned 2500$ They sent me a MISC 1099 form that has almost 19000$ earned, which is wrong. I asked them to have it corrected, but they ignore my requests. I have no written contract with them, never had a paystub or anything. Money were directly deposited into my account. Can I report them to IRS.

2 : How can I protect myself if it is beyond my control to correct this. 

Answer :

1 : Basically, you, as a contractor, are supposed to submit a W9 to a payor; form 1099 is issued to you for services you performed during the year. Most contractors submit Form W-9 to their hiring agency for salary and tax reporting purposes, but a hiring agency or employer can issue Form 1099 without Form W-9. The IRS can assess a $50 penalty against the payor for submitting an incomplete Form 1099. If he submits a letter along with Form 1099 stating that he tried to get the information from you and you were unwilling to give it to him, the IRS can waive the penalty because he had reasonable cause for submitting an incomplete form. The IRS requires him to withhold backup taxes from your future compensation until you provide him with an SSN. You can give him that information without completing Form W-9 if you choose to do so. According to the IRS, the backup tax withholding rate for a non-compliant contractor is 28 percent. If he does not withhold the required amount of backup tax from your pay, he can be held responsible for the tax. Form W-9 is usually completed by you and given to the payor before you receive your first check. When tax time rolls around, he will already have the information that he needs to complete Form 1099. As the payer has not yet sent you a corrected form, you can get help from the IRS. You need to call the IRS for assistance with the toll-free number 800--829—1040(it takes a long time to contact an agent) and give the IRS representative your name, your address, your phone number, your Social Security Number, the payer's name, the payer's address, and the payer's phone number, plus your dates of employment as a contractor or any other relevant dates for the income. When you do this, the IRS will contact the payer to get the corrected 1099 for you. If your corrected 1099 form has not arrived and you are almost out of time to file your federal income taxes, you must download form 4852 from the IRS website (IRS.gov). The form is only to be used as a substitute 1099 form. On the form, you can enter in the correct information for your 1099. If you receive a corrected 1099 form after you file form 4852, you must file an amended return. When the payer sends you the corrected 1099 form, a copy is also sent to the IRS. You can download form 1040X from the IRS website, which is the amended tax return form. Complete this form with the corrected 1099 to amend your tax return with the corrected information.

OR : Your responsibility as a taxpayer is to report the whole amount of the income of $19K, you received and deduct your actual expenses. As the 1099-MISC is wrong, that can possibly create an IRS issue, but the key point is that you have proof of what you received. From what you're saying, apparently the client overstated your 1099. If you have reported more gross income on your Sch C than what's on that one specific 1099, the IRS won't even realize it's wrong. However, if that's the only client you have, and you've reported less than the amount on the 1099, you may have some explaining to do if the IRS contacts you about the difference. If this is your only 1099, I'd recommend that you insist to the client that you need the 1099 corrected (which isn't all that difficult to fix, by the way) because you don't want to be in the position to explain to the IRS that your client overstated the 1099, possibly leading the IRS straight to his door, too.So, you need to report the excess amount,$16,500($19K-$2.5K) as other expenses on your Sch C and need to report $19K on your Sch C line 1.

2 : As mentioned above. 

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Question : 2

Thank you very much for the extensive answer. I really appreciate it. There is a personal problem involved in this situation. I helped his business to avoid court and obtain licenses. It took a while but I managed to do it as a friend, while expecting him to help me in exchange with help for my venues.Once he got what he needed, with my help which cost me many hours of work, he bounced on his promise and did not do anything for my case. I asked for some payment but he paid me only10% of it, way beyond the actual cost of all hours I worked. I have never signed any contract with him, it is just verbal agreement.The money he paid were deposited cash in my bank account since we live in different states. If I call the IRS, to investigate, would that work. I have no W9, no contract, never signed anything. He has my social from long time ago. How can I protect myself.?

Answer :

I guess your personal situation is a legal issue. You need some legal professional help from an attorney.

However, he does this erroneous 1099 just so that I can lose what I actually made out of it. He will not correct it, because it is intentional.=====>>>>If the overstatement of the income on the 1099 Form was intentional that would likely constitute fraud or filing a false statement which is a crime. You may contact him to let him know this. (Your client will submit a copy of the 1099 form and 1096 to the IRS.). The IRS, in general, does audit the correct reporting nd can refer such cases to the Department of Justice for prosecution when taxpayers have overstated income for the purpose of increasing a refund( though this is not your case).

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