Should there be an error on your 1099 form, it is a bad idea to ignore it. You will save yourself a lot of stress by taking control of the issue.
All your income, whatever the source, maybe freelance or interest on your savings account, must be reported to the IRS, and you will have to pay taxes on it. As a result, you should always be careful about your 1099 form in the months before the tax deadline.
Whenever you have a freelance work of $600 or above, a dividend income, or an interest from a bank, there should be a 1099 form accompanying it. Ideally, all the amount you have on your 1099 should correlate with your records.
Now, what will you do when you get a 1099 form that is not correct?
Whenever you get 1099 that is wrong, you must reach out to your issuer and correct it. In the same way, if they send you 1099 in error, it is illegal for you to abandon or overlook it. It is a good idea to correct it with the IRS to avoid getting into trouble
There is something you need to understand about 1099 – It is not just meant to show the statement of your earnings and make it easy for you to file tax. Whenever you get a 1099 form from a company or anyone, you will have to file with the IRS as well. Bear in mind that the IRS already has a copy of your 1099. As a result, when you file your tax return, they will check if everything matches. This will probably raise some eyebrows that could trigger an audit if it doesn't match. As a result of this, do not ignore an error in your 1099. Failure to address any issue will subject you to a lot of stress and questioning when you are filing your tax.
There is no significant stress in fixing a wrong 1099 form. However, it would help if you always act fast whenever there is a mistake. Although, issuers are usually given till the end of February to file their 1099 form. They still have till march 31 for electronically filed form. This is why filing quickly is good so that you can correct it with the issuer before the form gets to Uncle Sam.
In cases, however, that an incorrect 1099 has already been sent to Uncle Sam, you will have to contact the issuer and request that they resubmit the amended form. There is a box you can tick on the form to indicate that you are adjusting.
Once you have enough proof that the original form from the issuer is wrong, you have a good chance of getting your 1099 form amended and stay away from any trouble. If the issuer, however, does not corporate, there are extra steps you will have to take.
if the person that issued the wrong 1099 form did not amend the error, there are some steps you have to take. First, you need an explanation of your tax return that explains your predicament with attachments that support you. Let us assume that you got a 1099 form revealing that you were paid $25,000 from a company when indeed, you got $2000. Listing that you got $20,000 on your tax return and calling it a day makes no sense. The IRS, without a doubt, will see the discrepancy and come after you for an explanation. In the same manner, you cannot just pay tax on the extra $5000 that was miscalculated.
What you will do is list the $20,000, with an attachment that explains the extra payment. This statement should also include documents that support your assertions. Such documents can include copies of canceled invoices or checks. There should also be proof that you tried to reach the issuer but did not succeed.
Nevertheless, this step requires some extra work, and it is essential to prevent having issues with Uncle Sam. Without a doubt, there are some mistakes with 1099s that should be addressed. If you don't, you might bear the burden.
