Form 1099 will be mailed to you in January of the following year if you earned money through an internet platform or any other source of income that is not associated with a typical work arrangement. The money may come from many places, including selling goods, working as a subcontractor or freelancer, renting out your home or another property, or even a small business. The information supplied on your W-9, including your name, Social Security Number, and Employer Identification Number, will be included on a 1099 form, which will also be filed with the IRS. This form will reflect the amount of money paid to you by each company or selling platform you had business with during the year.

When you earn interest from a bank, dividend income, or money for freelance work that is equal to or greater than $600, you are required to get a Form 1099 from the payer. In most cases, the sums that are mentioned on your 1099s will correspond to the amounts that you have recorded. But what should you do if the 1099 that you receive is completely inaccurate? It is imperative that you contact the issuer of your 1099 as soon as possible after discovering that it contains errors and request that it be corrected. In a similar vein, if an incorrect 1099 was sent to your address, you cannot just disregard it or get rid of it. Instead, you will need to fix the problem in order to avoid getting in trouble with the Internal Revenue Service (IRS).

However, what takes place if 1099 you get has an error? If the monetary amount needs to be corrected, the information you supply on your tax return may directly oppose the information the IRS maintains. Your taxable income might be inflated or understated, depending on the significance of the variations.

You Must Pay Attention To The 1099 That Is Filled Out Incorrectly.

One thing about 1099s that you probably need to be made aware of is that their primary function is not just to summarize your earnings but also to simplify the process of submitting your taxes. When a business or organization sends you a Form 1099, they must send a copy to the Internal Revenue Service (IRS). After then, the IRS compares the information on your tax return to the 1099s it already has in its database to ensure that everything is accurate. If it does not, it is possible that your return will be singled out for examination. Because of this, you cannot just disregard the 1099 that contains an error. If you choose not to address the issue, you must provide a great deal of justification when it comes time to submit your taxes.

How To Fix A Wrongly Filled Out 1099

It is not necessarily a difficult experience to get a mistake fixed on a 1099 form; nonetheless, the key is to respond soon once you identify the error. When filing their 1099s with the IRS, issuers typically have until the end of February to do so. However, the deadline for forms that are done electronically is extended to the 31st of March. Therefore, if you move fast enough, you can capture the issuer of the form even before it is sent to the IRS in the first place.

If you are dealing with a scenario in which an inaccurate 1099 has already been sent to the IRS, you must request that the issuer submit a rectified form. The form contains a checkbox that the issuer can use to indicate that there has been a modification.

Suppose you can prove that the issuer's initial form included errors. In that case, there is a significant likelihood that you will be able to get your 1099 modified and stay out of legal hot water. However, if the issuer does not comply, you may be required to conduct further procedures.

Contesting An Incorrect 1099

If the issuer of an incorrect 1099 refuses to rectify the situation, you must explain the discrepancy on your tax return and provide supporting documents. Take the example of receiving a 1099 from a corporation that incorrectly states you were paid $20,000 while, in reality, you received just $15,000. You can't just claim that $15,000 and be done with it; the IRS will catch on and come after you for the difference. You shouldn't, however, go ahead and pay taxes on a fictitious $5,000 windfall.

Instead, you should report the $15,000 but provide an explanatory note about the overpayment. You should add things like canceled cheques and invoice copies to back up your claim in that statement. Documentation showing that you contacted the issuer and received no response or refusal to cooperate should also be included.

Those next procedures will need more work, but they're necessary to avoid an audit or paying taxes that aren't owed. Mistakes may and will be made on Forms 1099; nevertheless, you will be the one who loses out if you ignore them.