Posted by Linda_H/FL on 1/14/12 9:53am
Msg #409026

Wrong 1099 sent?

I just got an e-mail from a company - and if I'm reading it correctly, all their contractors got it - that they sent the wrong 1099 out -

They sent 1099's to all their contractors regardless of amount paid (no biggie) BUT they sent out a 1099B instead of a 1099Misc. They say not to be concerned - when they send their 1096 in at end of February it will be reported as miscellaneous income. They claim most of their contractors are happy with this.

Now, I'm not a tax expert, but is this not a problem? Should this company not be sending out corrective 1099's? The 1099B is for Broker and Barter Exchanges - isn't this looked on differently by the IRS? When 1099's go out, duplicates are filed with the IRS - the IRS gets a copy of the 1099 sent to the contractor - won't the IRS be looking for this to be reported properly??

I know if it were me I'd not be satisfied and I'd be requesting a new 1099 from them. It's Miscellaneous income, not Broker and Barter exchange.

BTW, this doesn't affect me - I didn't do any closings for them in 2011, but the whole subject is just interesting to me and I'd like to hear about it.

Look forward to hearing from some of the tax people here.

Reply by MW/VA on 1/14/12 9:57am
Msg #409027

I got that same 1099B, Linda. I asked about it, and was told it was ok and is still being reported as Misc. Income in Box 7. I don't think so & don't think it's going to fly. Maybe if enough people make an issue of it they will send corrrected forms. This ss is one of my favs, and this is very unusual for them.

Reply by Linda_H/FL on 1/14/12 10:22am
Msg #409029

I'm not knocking the company....mistakes happen

but I don't think their current remedy is "OK" and proper steps need to be taken to correct the error - and I don't care who their accountant is - there's miscellaneous income being reported on a Barter and Exchange matter...

If it were me I'd let them know I want a correct 1099 issued - I wouldn't settle for using the 1099B - but again, that's just me...

Reply by KARA/NJ on 1/14/12 10:23am
Msg #409030

Re: I'm not knocking the company....mistakes happen

I already requested a new one to be sent.

Reply by MW/VA on 1/14/12 11:06am
Msg #409034

Yes, I need to do that. n/m

Reply by JanetK_CA on 1/16/12 12:54am
Msg #409120

Re: I'm not knocking the company....mistakes happen

As I understood it, the mistaken forms were only sent to notaries and would not be reported to the IRS that way.

Reply by Deborah Breedlove on 1/14/12 12:32pm
Msg #409044

I got the same email. I'm not concerned because they say the copy they are going to send to the IRS will be on the right form - 1099-Misc. The 1096 is the "summary form" for all the 1099s you send to IRS with their copies of the 1099s. So they're saying they're going to make the correction before they send to IRS with the 1099s. Relax.

Reply by Linda_H/FL on 1/14/12 12:52pm
Msg #409047

I'm relaxed...it doesn't affect me...

however, their fix is wrong - if the copy they're going to send to the IRS is on the correct form then you people who worked for them need the corrected 1099 before you file. You cannot file your taxes off that form that was sent.

I know what the 1096 is - did taxes returns (quarterlies and yearlies) for a law firm for years - 940's, 941's, 1099's, W-2's, etc etc - the whole 9 yards. Since they've realized their error, I don't see why they don't just send the correct 1099's now to all of you - why make you wait til end of February. They may REPORT it correctly, but without the correct 1099, YOU won't.

JMO

Reply by John Tennant on 1/14/12 12:39pm
Msg #409045

1099B

Yes, get a new 1099-misc. Irs is moving very quickly toward matching up returns to the information they receive from employers and hiring entities.

1099B information in reported on Schedule D, not Schedule C.

Currently the IRS takes about 3 years before matching everything up to the return electronically. At some point a taxpayers return could get audited because of the wrong 1099.

I.E. 1099B sent by hiring company, no Schedule D on the taxpayers return. This can cause problems for the taxpayer.

Reply by John Tennant on 1/14/12 12:43pm
Msg #409046

Re: 1099B

I have to disagree with you Deborah.

The taxpayer is responsible for any financial penalties or interest on incorrect reporting, not the hiring company.

No matter what the employing agency says, if they do not do it correctly it can easily come back to haunt you.

Reply by Deborah Breedlove on 1/14/12 1:07pm
Msg #409049

John is right.....

Each taxpayer is responsible for making sure their information is reported correctly. I'm also a tax preparer for 25+ years, an Enrolled Agent and have a tax and accounting practice. I guess I didn't see this as a big deal because I believed them when they said they'll correct before they send the IRS their copies. Easy fix. If the IRS never sees the 1099-B, I should never see a CP2000 from the IRS.

When we prepare W-2s and 1099s for business clients, we deliver to the recipients in January, but we don't send SSA and IRS their copies until required at end of February, or now the end of March if e-filed. Because of that delay after the payees receive their forms, we can make corrections before sending the SSA/IRS if notified. So if the recipient looks at their W-2 and realize they forgot to notify employer that they had moved, or gotten married/divorced and changed their name with SSA, they can still call us to make corrections on the W-2 or 1099, before it's ever even sent to SSA or IRS. I figured that's what this SS did, so I didn't worry about it.

But each notary should definitely do what makes them comfortable. I will say that we've never put the info on the wrong type of 1099. Yet. Knock on wood.

Have a good tax season!!

Reply by Linda_H/FL on 1/14/12 1:21pm
Msg #409050

Re: John is right.....

"If the IRS never sees the 1099-B"

That was my only point.

And I'm going to asssume, Deb, that as a tax preparer, you only prepare returns based on the info provided to you by the client - and as such, if they give you a 1099B, you must prepare the return accordingly and not assume it truly should be a 1099 Misc - you can't even rely on the client's word....IMO you have to work with what's in front of you - which is a 1099B.

Reply by John Tennant on 1/14/12 1:29pm
Msg #409052

Re: John is right.....

Absolutely correct Linda. All of my clients, before I start to prepare their return, are required to read and sign a statement that I use, stating that all information provided will be in documentation form and will be "true and correct" to the best of their knowledge.

Purpose: essentially an "audit proof" filing, which is in both their and my benefit.

Reply by Eileen McRorey on 1/14/12 1:30pm
Msg #409053

Re: John is right.....

I prepare taxes during the season and I would not accept the 1099B as a substitute for the 1099Misc.....

Reply by taxpro on 1/14/12 1:41pm
Msg #409054

True dat, Linda!

If it's my client who shows up with a 1099-B, I'm going to insist they get the correct form from the issuer, just to be sure it was reported correctly to the IRS. Or at least, the client has something to show the IRS if they get a CP2000.

Now speaking as an EA, I hereby take back everything I said before; everyone should get a corrected 1099!

Also - I don't use the 1099-Misc forms I receive to compute my income. I don't get 1099s for much of it, and I use my accounting records anyway. Naturally I do check the 1099s for accurate amounts, etc, and I always notify the issuer of errors. In this case, they notified me first and I was ok with that. Since I obviously do my own taxes, I'm going to report it as it should be reported. But you're absolutely right, if it's my client's return, I'm going to ask them to get a corrected 1099.

Another error I see often is when they report my EIN with my personal name, instead of my business name that is associated with that EIN. They'll also report the EIN in the SSN format. So it should be entered as 12-3456789, and they report it as 123-45-6789. If they don't correct it before sending to IRS, they'll get a notice telling them the name doesn't match the taxpayer ID number, and they have to respond to that notice - a real PITA, so I try to help them avoid that by telling them to correct it right away.

Reply by ikando on 1/14/12 3:43pm
Msg #409060

Re: True dat, Linda!

taxpro, my EA husband said the same thing--use your accounting records rather than relying on 1099 forms, which are not sent with the taxpayer's return anyway.

Bottom line: the taxpayer is responsible for reporting all income of whatever sort to the IRS. It's good to have the correct documentation for your backup records, and that can come to you even after you've filed if you want to file before February 28. And when I received the email, I understood the SS was going to send corrected docs before they filed the 1096.

Reply by JanetK_CA on 1/16/12 12:52am
Msg #409119

Re: True dat, Linda!

I agree with you and taxpro. I've never turned in my 1099 copies with my returns. I always have more income to report than the total of all my 1099s because I work for a wide variety of clients. Also, most title companies I've worked for pay out of escrow and treat each assignment as an individual job and don't send a 1099. I also just report actual income.

I got that email, too, and didn't give it a second thought for the above reasons. If the IRS is never going to see it and if I'm claiming more income than their records show, I don't see a problem.

Reply by MW/VA on 1/14/12 9:27pm
Msg #409074

Easily resolved. They're going to send a correct 1099-Misc.

I knew from the get-go that the 1099-B wouldn't be acceptible. I'm guessing that someone just inadvertantly pulled up the wrong 1099 forms when preparing the tax forms.
Again, no problem with the ss correcting the error. :-)