Taxpayer (rancher/farmer) paid someone to do work for him. The invoice that worker provided taxpayer provided a breakdown of items with some items being fertilizer used during the job, monies worker paid other parties to complete work, and rental of equipment to handle job. Taxpayer 1099'd worker for the total invoice. Worker is now being audited and CPA of worker is asking taxpayer to amend 1099 to a lower amount to not include material used (fertilizer) and payments to other parties. I am surprised that CPA would ask taxpayer to do that and would like other tax preparers' input on how to address this situation. My advise to taxpayer is keep 1099 as is but was curious if other taxpayers have run into this issue before?
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I generally prepare 1099-Misc for the total payment made to an individual sub contractor based on the payments made. I have had to correct only one 1099-Misc in all these years and that was due to an error by the bookkeeper.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR -
I'd probably send the CPA a copy of the Form 1099 instructions, with this highlighted:
"Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. For example, report the total insurance company payments to an auto repair shop under a repair contract showing an amount for labor and another amount for parts, if furnishing parts was incidental to repairing the auto."
It's found in the section headed "Examples of payments to report in box 7"
"The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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[QUOTE=JohnH;n295565]I'd probably send the CPA a copy of the Form 1099 instructions, with this highlighted:
"Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. For example, report the total insurance company payments to an auto repair shop under a repair contract showing an amount for labor and another amount for parts, if furnishing parts was incidental to repairing the auto."
It's found in the section headed "Examples of payments to report in box 7"
Thanks John; great idea.
Peggy Sioux
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Regardless of the amount on 1099, the entire invoice should have been reported on Sch C. Sounds like it wasn't and now they are asking you to adjust it which IMO would amount to fraud. I would absolutely not adjust the 1099.Comment
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