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1099-MISC income under - reported by the company. Should I just keep quiet or speak up?

Spring Hill, FL |

I work as a freelance consultant. In 2012, I did some project for a company and they paid me 16,400. Now when they sent me the 1099-MISC, I see that Box 7 only mentions 14,200. It looks like they made a mistake on 1099-MISC and do not exactly remember what was paid to me. My first reaction is just to keep quiet about it. Telling them about their mistake can only cost me more taxes. Do you foresee a scenario where my speaking up can be beneficial to me?

Attorney Answers 4

  1. Yes - by intentionally under reporting income you would be committing tax fraud and could be faced with penalties. If you are certain the amount on the 1099 is wrong, do the right thing and inform the company and report the correct amount on your return.

  2. Yes. Speaking up will keep you out of criminal liability. If the amount is incorrect then you should report it. You may not have increased tax liability because of the additional income. There are a lot of deductions available for self employed individuals. If the company has done this to many other 1099 contractors then they are committing fraud. You can report them (please use a tax attorney to represent you) and get rewarded by the IRS.

    My comments are NOT LEGAL ADVICE. They are for informational purposes only. Actual legal advice can only be provided after you have signed an engagement letter. Answering this question does not create an attorney client relationship. Remember that without attorney client privilege you could possibly divulge information that can hurt your legal rights in the future. I am a tax attorney in Miami Florida. I can help you with your federal tax issues via a secure client portal if required.

  3. Discuss this with the company and request a CORRECTED 1099.

    This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit Steve Zelinger's website:

  4. Yes. If your federal income tax return understates your gross income for the year, your tax liability may also be understated. If the Internal Revenue Service (IRS) identifies the discrepancy and determines that you are underpaid, you will be responsible for paying the additional tax, plus any penalties and interest that accrue. Penalties are generally capped at a certain percentage; however, interest can accrue forever.

    If the IRS determines that you intentionally understated your income in order to evade a known tax, they may treat your return as fraudulent. If the IRS does this, you could face substantial civil and criminal penalties. Moreover, the statute of limitations -- the amount of time during which the IRS may audit your federal income tax return -- does not apply to fraudulent tax returns, which means the IRS could potentially audit your federal income tax return and assess additional tax, penalties, and interest at any time in the future.

    To avoid these issues, you absolutely should contact the payer to request a corrected 1099-MISC. If the payer refuses to correct the form, you must attach an explanation to your federal income tax return and report your income correctly. In sum, always remember that you are responsible for the accuracy of your federal income tax return; and, as such, you should report your income correctly even if your customers choose not to.

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