How to Dispute a 1099 and What Your Next Steps Are

Form 1099 is a tax document used to report various types of income received from a source other than an employer. This income can include payments for services as an independent contractor, rental income, interest, dividends, or other miscellaneous payments. The information on a Form 1099 is reported to both the recipient and the Internal Revenue Service (IRS), making its accuracy important for proper tax reporting.

Understanding 1099 Errors

The IRS employs matching programs to compare income reported on a tax return with information provided by payers on Form 1099. Discrepancies can lead to IRS inquiries, notices, or audits.

Common errors on a Form 1099 can include an incorrect income amount, such as reporting more income than was actually received or earned. Income might also be reported in the wrong box or category, like nonemployee compensation mistakenly classified as miscellaneous income. Errors can also extend to personal identification details, such as an incorrect Social Security Number (SSN) or Taxpayer Identification Number (TIN), or a misspelled recipient name or address.

Sometimes, a Form 1099 may report income never received or already repaid to the payer. Duplicate forms, where the same income is reported on two separate 1099 forms, can also occur.

Attempting Payer Correction

When you receive an incorrect Form 1099, thoroughly review it against your personal financial records. Compare the reported income and details with your own documentation, such as invoices, bank statements, contracts, and payment receipts, to pinpoint the discrepancy.

After identifying the error, gather all supporting documentation that clearly demonstrates the discrepancy. For example, if reported income is too high, provide bank statements showing actual deposits or invoices detailing services rendered and payments received.

Next, initiate contact with the payer who issued the incorrect Form 1099. While phone calls or emails can be initial steps, a formal written letter sent via certified mail with a return receipt provides a documented record of your communication. In your communication, clearly state your name, SSN or TIN, the specific type of 1099 form (e.g., 1099-NEC, 1099-MISC) and the tax year it pertains to.

Provide a clear explanation of the error, referencing your supporting documentation. Explicitly request a corrected 1099 form. The payer should issue a Form 1099-CORR, or a new 1099 with the “corrected” box checked, reflecting accurate information. Maintain detailed records of all communications, including dates, names, conversation summaries, and copies of correspondence and supporting documents.

IRS Reporting for Unresolved Issues

If your attempts to resolve an incorrect Form 1099 directly with the payer are unsuccessful or if the payer is unresponsive, you can involve the Internal Revenue Service. This step becomes necessary when the payer fails to issue a corrected 1099 after reasonable attempts on your part.

You can contact the IRS by calling their toll-free number for tax questions. When you contact the IRS, be prepared to provide specific information regarding the incorrect Form 1099. This includes a copy of the original incorrect 1099 form you received.

You will also need to detail your attempts to get the 1099 corrected directly from the payer. This includes dates of contact, methods of communication (e.g., certified letter, email), and any responses or lack thereof from the payer. Additionally, you should provide the IRS with your supporting documentation that proves the error on the 1099. Once the IRS receives this information, they will typically contact the payer on your behalf to request a corrected 1099.

Tax Filing with Uncorrected Information

If you have an incorrect Form 1099 and the issue remains unresolved by the tax filing deadline, you must still file your tax return accurately. Report the correct amount of income, regardless of what the erroneous 1099 form states. Do not simply report the incorrect amount if you know it is wrong.

To explain the discrepancy to the IRS, you should attach a statement to your tax return. This can be a simple letter explaining the situation or, for more complex situations, you might use IRS Form 8275, Disclosure Statement. This statement should clearly outline the difference between the income reported on the 1099 and the amount you are reporting on your tax return.

The attached statement should also detail your efforts to have the 1099 corrected by the payer and any involvement of the IRS in the dispute. Even after filing, continue to maintain all dispute-related documentation, including copies of the incorrect 1099, your communication with the payer and the IRS, and any supporting evidence, for future IRS inquiries or audits.