1099 Misc Dilemma

[S T]

I have a taxpayer, that I obtained the 2009 and 2008 IRS transcipts on through e-services.
No, they probably aren't 100% accurate for 2009, but at least enough to provide me with some info.

2009 IRS eservices Transcript shows two 1099 Misc reportings. One of the reportings is actually for 2008 which was reported on the 2008 tax return. Small amounts less than $1,000 each. It is for referral services on a Travel Agency Booking. The 2nd one is actually for 2009.

I have the payer's copies of the 1096 and 1099 misc forms, and there was a 1099 Misc form issued for the proper amounts in each year. The payer completed the 1096 and 1099 Misc forms themselves, and there were many corrected statements sent in for one reason or another for both 2008 and 2009.

I do not represent the "payer" and do not have a POA to make any necessary corrections or even make the phone call to Tax Practioner Hotline. I have a POA on my taxpayer the receipient, but that doesn't do me much good in trying to resolve the reporting issue.

The concern I have is the CP 2000 matching program for 2009 - any suggestions on how to report on Schedule C for the erroneous 2008 1099 Misc form entered into the IRS system in 2009??? Total for 2008 and 2009 is less than $ 1,500 all subject to SE and no deductions.

Thanks,

Sandy

[erchess]

I don't understand

why you cannot call PPL on behalf of your client and get someone to let you fax to them whatever they need to take care of things. They may need to contact the payer but I don't see that correcting an error either the payer or the IRS made that is material to your client's taxes is a problem.

I could be wrong here but I'd sure like to have a cite. I came up in this business correcting errors in information documents when I had reasonable belief that they were wrong and I knew what was right. I don't think I had an information document for one client and from another until rather recently and I agree in such a case it's easier I just amend the information document and file the amend as if the recipient were not a client.

[veritas]

It would be

a simple matter too file a corrected 1099 for any individual from any company. Wonder if some more devious types have figured that out?

[S T]

Corrected Form Transmittal

Form 1096 requires a Signature, I have no POA authority for the issuer of the 1099 Misc-
The payer documents that I have received are a mess, so no telling what is actually at the IRS - we have voids, Issuer has corrected TIN's#, and also corrected amounts. The payer, is a very small business, and will not PAY me to correct and at this point I am not even sure there is a "simple" correction for 2 years worth of 1099 Misc forms.

It is anyone's guess.

I am anticpating an ongoing problem for MY Taxpayer receiving a CP 2000 notice for 2009, if 1) it isn't corrected, or in the alternative 2) is there someway to report and then not tax the taxpayer on 2009 for the exact income reported on a 2008 Tax return/1099 Misc form?

I have dealt with a few of these CP2000 matching notices in the past on Biz returns, and it is a terrible mess to straigten out and make IRS understand, so for the small amount, I am trying to avoid a notice on this Taxpayer Return.

Thoughts,
Thanks,

Sandy

[Black Bart]

erchess,

...PPL...may need to contact the payer but I don't see that correcting an error either the payer or the IRS made that is material to your client's taxes is a problem.

I just amend the information document and file the amend as if the recipient were not a client.

I don't understand your response. Are you saying Sandy can/should amend a 1099 from someone who is not her client? She doesn't have any authority to do that (although as Veritas points out, it could be done and very likely nothing would come of it, but it doesn't seem very professional to me).

As far as getting IRS to find/contact the payer, I can't imagine that they would go to the trouble other than perhaps sending them a letter about it (even that is probably a long shot and would take months). Have you ever done that and known them to contact a payer about a mistake?

[Black Bart]

You're certainly

...I have dealt with a few of these CP2000 matching notices in the past on Biz returns, and it is a terrible mess to straigten out and make IRS understand, so for the small amount, I am trying to avoid a notice on this Taxpayer Return.

right about this -- taking into account all the corrections, etc. it's like pullin' teeth to get such straightened out.

I've got a clipping from "Tax Hotline" taxnewsletter by a CPA who says "...report the 1099 amount in income on your tax return so IRS computers don't "flag" the amount as missing. Then subtract a corresponding amount to adjust your income to what you think is correct, and add an explanation for the adjustment." He doesn't give any reason/justification for the action. Also does not say where to subtract it off, but I'm thinkin' maybe "returns and allowances" on page one, line two of the C (it's not a return, but it surely is an allowance of sorts).

This isn't a really satisfactory solution to my way of thinking 'cause if you DO include an explanation it's kind of like saying "this return isn't exactly right" and I don't know what they would do with it (probably nothing is my guess). On the other hand if you DON'T explain, the return will slide right through, he won't get a CP2000, and you'll never hear from it again -- downside is if it's ever audited you've got to explain your line of thinking (guess you could say "Well, you see, it was going to be an ungodly amount of trouble for no money, so I just thought...").

[JohnH]

I vote for Bart's approach. But I'd be inclined to enter the adjustment in the income section of Schedule C AND attach a supporting schedule. (A list of check amounts & dates actually received would be nice if that happens to be available. Then a short entry with a minus for the amount on the 1099 form, carry the minus difference to the front of the Schedule C)

By handling it this way, you've disclosed everything, but complicated it enough that the average processor will just toss it in the "accepted" file and move on. Probably would not work for huge amounts of money, but for a couple of thousand or so I'm betting it will sail right through.

[Gretel]

I second, for whatever it is worth. All effort (and cause for IRS notices) need to be kept reasonable. After all, we have to file a correct return no matter what the forms we deal with say.

[erchess]

I hope this is clearer

Yes Bart I have dealt with what I believed were incorrect information documents when I was in a large firm by copying everyithing I had and printing a one page summary of what I believed and why and sending same to a higherup. Sometimes they called me and sometimes they didn't. In at least one case they substantailly rewote my one page summary and signed it themselves. They would eventually let me know that they had called PPL, explained the situation, and faxed everything over to the person. This normally headed off computer generated responses about that issue though it obviously did not avoid manually generated responses totally and it did not avoid any responses on unrelated issues. I had a similar situation to Sandy come up this tax season and I handled it as I have described. We filed in April so I would not have expected a CP notice yet. It is this process that I would like a cite if anyone thinks there is a problem with my doing it.

My second paragraph addressed a different fact pattern from op - sorry that was unclear. In that scenario I was doing over several weeks a bunch of related work. Suffice to say I realized while working on one person's return that his 1099M prepared by me was wrong so what I did was amend the 1099M with of course the permission and if memory serves the signature of the President and then file the indvidual return of the fellow who had to have his 1099M corrected. Much easier situation of course but we can't always have it easy. The error by the way consisted of a transposition of digits in the guy's ssn so there was no need to amend the corp's return.

I certainly had no intent to suggest that Sandy file an amended 1099 without authorization. Based however on her later posts I will say this. I am still looking for more work (which I don't think she is) so if I thought the small company had enough records for me to figure out what the payroll report in question was and should have been, I'd fix it for free if the owner shook my hand and came on board as a client. Of course I would not do any such thing if I were already anything like as busy as I wanted to be with my business.

[Lion]

1099

If you know the amount that should be for 2009 and the 2008 amount, and if he reported his correct 2008 earnings, then report the 2009 1099s as filed with the IRS for matching purposes and then subtract out the amount your client previously reported on his 2008 return, probably under Other Expenses as Reported on 2008 Return or some short description. Make sure he can prove his 2008 and 2009 receipts and that they do match what's reported as income on his 2008 and 2009 returns. If so, the IRS shouldn't mind that they received tax early. If filing by paper anyway, include a detailed listing of his receipts. If e-filing, keep a copy of his documentation in your files as well as having him keep it with his return copy in anticipation of a letter asking for back-up. If he received BOTH 2008 and 2009 1099s for the SAME income, duplicating his income, then I think I'd go with the paper return including details of his 2009 receipts as well as his receipts already reported on his 2008 return.

[S T]

It is now clearer

Thanks everyone!

I now know how to document and proceed with the filing of the tax return for 2009, and have informed the client - Should be easier (I hope) than a CP 2000 notice a yar and half or two years from now.

I have copies of , I believe all documents I should have for future reference and will make notations on the filed tax return.

Sandy

[joanmcq]

I use Lion's method when a 1099 doesn't match income received because of an accrual basis payer issuing a 1099 to a cash basis payee that did not receive payment until the next year, or even if the check was in the mail at the end of the year. Just back it out as other expenses as 'income reported in year XXX"

[Black Bart]

This

...Just back it out as other expenses as 'income reported in year XXX"

sounds like the shortest, simplest version of what everybody's saying. Have you previously used that exact wording in the "Other Expenses" section of C without any kickbacks?

[joanmcq]

nope. no problems so far.