Business owners are required to issue 1099-Misc forms to non-employees to whom they have paid more than $600 in a year for goods and services, unless paying it to a corporation. The amount that is reported on the 1099-Misc will usually match the records of the person receiving the form. However, occasionally the person receiving the form does not agree with the amount reported on it. The IRS does not provide a method of disputing the amount on the form, but you do not have to report an incorrect amount on your tax return.
Contact the issuing company first and ask for a breakdown of its total. Once you can compare the specific payments it has recorded with your own records, the discrepancy may become obvious. If the error is the company's, provide it with proof of the mistake and ask for a corrected 1099-Misc. If the company is unwilling to do so, or disagrees with your findings, proceed to Step 2. If the company is willing to correct the 1099-Misc, skip the remaining steps.
Input the amount shown on the 1099-Misc onto your tax form. If you are filing a Schedule C, show the amount from the 1099-Misc as gross income.
Add an additional line on the detail for income showing the necessary adjustment to the 1099-Misc amount. If the amount on the 1099-Misc is more than it should be, enter your adjustment as a negative number. The description for the detailed statement should read "Adjustment to Correct 1099-Misc."
Maintain your records with proof that your adjustment is valid. If you are audited by the IRS, you will need to show the auditor why you made this adjustment and prove that it was appropriate.
Tips & Warnings
- If your total business income exceeds the amount reported on 1099-Misc forms, it does not matter if one of the forms is reporting an incorrect amount. The IRS will compare the total reported to it from 1099-Misc forms and the amount reported on your return and will only question you if you are reporting less on your return than is reported to them on the 1099-Misc forms.
- If you adjust your income down from the amount reported on a 1099-Misc, make sure you are correct and that you can justify this adjustment under audit. If the auditor finds the adjustment to be invalid by receiving proof from the payee that the 1099-Misc is correct, you will have to pay taxes on the additional income along with late interest and penalties. Other penalties, such as for fraud, may be attached if the auditor believes the adjustment was made only to evade tax.
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