One of the great things about being self-employed is that no income tax is withheld from your compensation. But you still have to pay taxes on that income and sometimes, your 1099 tax forms will have mistakes. Here’s how to deal with 1099-Misc problems.

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Why is a 1099-MISC is Necessary?

The IRS will often still have some idea of how much money you’ve made. Your clients must complete IRS Form 1099 if they’ve paid you more than $600 over the course of the year.

The client must report this to:

  • The IRS
  • Your state tax office if it has income tax

Does The IRS Know How Much You’ve Made When You’re Self-Employed?

It often does. To make sure you’re not underreporting your income, IRS computers check the amounts listed on your 1099 forms against the amount of income you report on your tax return. The IRS may flag you for an audit if the amounts don’t match.

You don’t have to file the 1099 forms with your tax return. Just keep them in your records.

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When Do 1099 Forms Have to Be Sent?

You should receive all your 1099 forms for the previous year by January 31 of the current year. Thus, you should have received all your 1099-MISC forms for 2017 by January 31, 2018.

Not all clients file their 1099 forms on time: You could end up receiving a 1099 in February, March, or even later.

On the other hand, not all hiring firms wait until the January 31 deadline to send you a 1099. Some will send you a 1099 along with your payment so that they won’t have to send you the 1099 form later. This means you may receive 1099 forms throughout the year.

Your clients may send your 1099-MISC electronically if you agree to this. Otherwise, they can mail them. Make sure the hiring firms you worked for have your current postal or email address—or the forms might not arrive on time (or at all).

What About 1099s with Errors?

Check the amount of compensation your clients say they paid you in each Form 1099 against your own records, to make sure they agree. If there is a mistake, contact the client immediately.  Request that they correct and file the new Form 1099.

You don’t want the IRS to think you were paid more than you really were. The 1099-MISC form has a special box that should be checked to show that it is correcting a prior 1099 form.

What If I Didn’t Receive A 1099?

It is not unusual for clients to fail to file 1099 forms. This may be unintentional. The client may not understand the rules, not have your correct address or may just be negligent in filing them. Some clients purposefully fail to file 1099 forms because they don’t want the IRS to know they’re hiring independent contractors.

If you don’t receive a 1099 you’re expecting, you don’t need to contact the firm that hired you. It’s not your duty to see that 1099 forms are filed. This is your client’s responsibility.

The IRS will not impose any fines or penalties on you if a client fails to file a 1099. It may, however, impose a $250 fine on the client—and exact far more severe penalties if an IRS audit reveals that the client should have classified you as an employee.

Do I Still Have To Pay Taxes If I Don’t Receive A 1099-Misc?

Yes. Whether or not you receive a Form 1099, it is your duty to report all the self-employment income you earn each year to the IRS. If you’re audited by the IRS, it may examine your bank records to make sure you haven’t underreported your income.

If you underreported, you will have to pay back taxes, fines, and penalties.

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Stephen Fishman

Stephen Fishman

Stephen Fishman is a self-employed tax expert and regular contributor to MileIQ. He has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for entrepreneurs, independent contractors, freelancers and other self-employed people. He is the author of over 20 books and hundreds of articles, and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Visit Fishman Law and Tax Files for more information on his work.
Stephen Fishman