1099 Name vs Business Name: What to Do When They Don’t Match

Handling tax documents can be a meticulous task, especially when discrepancies arise. One common issue occurs when the name on Form 1099 does not match the corresponding business name. This mismatch can create confusion and complications for businesses and individuals alike.

Reasons for Mismatched Names

Mismatched names on Form 1099 often stem from using a “doing business as” (DBA) name instead of the legal business name. The IRS relies on the legal name associated with the Employer Identification Number (EIN) for its records. Errors such as misspellings or incorrect abbreviations, like entering “Smith & Sons, LLC” as “Smith and Sons LLC,” also contribute to mismatches. Additionally, changes in business structure or ownership, such as mergers or acquisitions, can result in name changes that are not promptly updated on tax documents.

Tax Filing Effects

Name discrepancies on Form 1099 can disrupt the tax filing process. The IRS verifies reported income using these forms, and mismatches may trigger automated notices, potentially leading to delays or audits. For example, the IRS might issue a CP2100 or CP2100A notice, indicating a potential mismatch between the taxpayer identification number (TIN) and name. These notices can initiate a backup withholding process, requiring the payer to withhold 24% of future payments until the issue is resolved. This can create cash flow challenges for businesses.

For taxpayers, mismatched names can complicate claiming deductions or credits. If the IRS cannot match the income reported on the 1099 with the taxpayer’s return, certain deductions may be disallowed, increasing tax liability.

Recordkeeping Adjustments

Fixing mismatches requires careful adjustments to recordkeeping practices. Businesses should routinely audit their internal databases to ensure the legal name and taxpayer identification numbers match IRS records. Accounting software with compliance features can simplify this process by cross-referencing entered information with IRS databases.

Maintaining a record of business changes, such as mergers or rebranding, is also critical. Businesses should retain legal documents, including articles of amendment or merger agreements, to provide evidence of changes. These documents are essential for resolving discrepancies with the IRS.

Correcting the Form

To address a mismatched name on Form 1099, start by reviewing all related documentation to identify the error. Cross-check information against IRS records and the original contract or agreement with the payee. Once the issue is identified, contact the issuer of the 1099 to request a correction. This often involves submitting a written request for a revised form, such as Form 1099-MISC or 1099-NEC.

The issuer must follow IRS procedures to correct the form. This includes filing a corrected return with the IRS and marking the form as “Corrected.” Timely action is vital, as delays in issuing corrected forms can result in penalties under IRC Section 6721, which imposes fines for failing to file accurate information returns by the deadline.

Possible Consequences of Errors

Errors from mismatched names on Form 1099 can lead to several complications. The IRS may flag discrepancies for further review, potentially issuing notices to both the payer and payee. Unresolved issues could escalate into audits, diverting resources from core operations.

Penalties under IRC Section 6721 are another potential consequence. Fines start at $50 per incorrect form if corrected within 30 days of the deadline but increase to $110 by August 1 and up to $290 for corrections made later. If the IRS determines the errors were due to intentional disregard, the penalty rises to $580 per form, with no cap on the total amount.

Backup withholding is another significant repercussion. If a payee’s name and TIN combination cannot be verified, the payer must withhold 24% of future payments. This impacts the payee’s income and adds administrative burdens for the payer, who must remit the withheld amounts to the IRS and issue updated documentation. Addressing mismatches proactively is essential to avoid these financial and operational challenges.