Did you receive an incorrect Form 1099? Have you requested the payer to issue a correct 1099 Form? If the payer fails to do so, then the IRS may consider that you’re reporting incorrect income on a tax return. This may result in facing penalties.
Getting confused? Don’t worry! We will let you know how to deal with a fraudulent or incorrect 1099 Form. Furthermore, we provide you with information about why 1099s called information returns. Additionally, you’ll get to know what to do if you didn’t receive the tax form.
Why is Form 1099 called “Information Return Form”?
In general, when you make payments during the tax year to a contractor, you require to file Form 1099s to the IRS. These 1099 Forms are not tax returns. They provide the IRS information about the taxable transaction made throughout the year. Thus, 1099s called information return forms. Using the information provided on the 1099 Form, the IRS can check whether the contractors report their income on tax return forms.
For example, if you’ve received non-employee compensation of $600 for performing services as a cab driver. The employer sends you and the IRS Form 1099 NEC reporting the NEC. You should include the non-employee compensation received on the tax return at the year-end.
When do you receive a 1099 Tax Return?
As per the IRS rules, the business owner who makes payments to an individual apart from regular salaries and wages required to issue a 1099 Form. Before issuing a 1099 Form to the IRS, the payers must issue the information return form to the contractors to whom the payments were made. Hence, the contractor receives a 1099 Tax Form at the year-end i.e., January 31st for the payments made in the previous tax year.
For example, if you’re performing services for an organization as a web designer, then you’re a self-employed individual. Furthermore, you may receive IRS 1099 Tax Form by January 31st.
What do you do if you didn’t receive a 1099 Form?
Most business individuals misunderstand tax rules and fail to file Form 1099 with self-employed individuals. Moreover, the business owner may not issue a 1099 information return if the payment doesn’t exceed the minimum threshold requirements of the form. So, the business owner responsible to fill out a proper 1099, and payees responsible for accurately reporting all income received on the tax return. For instance, if you have worked as a logo designer for an organization and received payments of more than $600. Then you’ll receive a 1099 Form at the year-end. If in case, you didn’t receive an IRS 1099 Form, you can request the payer to issue the form.
What if you receive an incorrect 1099 Return?
As we know, there is a difference between the due dates to issue 1099 Form copies to recipients and the IRS. So, if you receive a 1099 information return with incorrect information notify the business owner immediately. The problem resolved hassle-freely if the payer has not yet sent 1099 to the IRS. In case, if the payor issues a 1099 Form to the IRS, contact the payer. And, then request them to complete and send a corrected 1099. Suppose, if the payor doesn’t cooperate with your request, then the easy way to address your problem by contacting the IRS. Even though the payer refuses to send a corrected 1099, address the incorrect 1099 on your tax return. Furthermore, include an explanation along with the tax return to ensure the IRS that you have received less income than the income reported on the 1099 information return form.
What the IRS does about a Fraudulent 1099 Form?
As we know, the primary purpose of 1099 Tax Forms to help in preventing tax frauds and tax evasions. Furthermore, it helps in ensuring the contractors report the 1099 income properly on the tax returns. Incorrect or fraudulent filing 1099 returns results in tax fraud. I suppose a payer fails to file a 1099 Form or files a fraudulent 1099, then the payer is subject to IRS penalties. Moreover, the amount of penalty depends on when the payer provides a correct 1099 to the payee and the IRS. If in case, the payer willfully filed a fraudulent 1099 return, the penalties become much more severe. To avoid penalties, stay on top of your financial records and track records on all payments.
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