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How to act if somebody sent to IRS 1099-MISC with false claim of payment?

New York, NY |
Filed under: Tax return

My friend learned from IRS that a small company sent to IRS 1099-MISC. The 1099 claim the company paid $80K in 2011 to my friend? My friend never had any business with the company, never got a penny. It is obvious the company used my friend's SSN to reduce net income. What to do? It is possible they claim cash payment and forged his signature under receipts.

Attorney Answers 5

Posted

I suggest that your friend phone the IRS office which alerted him to the existence of the bogus Form 1099-MISC and follow-up with a letter, stating that he/she: 1) has never heard of the company that sent the Form 1099-MISC to the IRS; 2) did not receive a copy of the purported Form 1099-MISC from the company (if that fact is true); 3) he/she has never had any involvement or business relationship with that company; and 4) he/she did not receive that payment from the company and has never received any payment from that company. After receiving your letter, the IRS should follow up and contact the company for substantiation of the payment it claims to have made to your friend. The IRS also may ask your friend to sign a Statement or Declaration setting forth his/her factual basis for asserting that the Form 1099-MISC was erroneously submitted to the IRS. If the IRS does not respond to your friend's letter, then he/she should elevate the matter to a supervisor in that office, and perhaps ultimately to the IRS Taxpayer Advocate's Office.

In my opinion, it is quite likely that the IRS will drop its insistence that your friend pay the additional tax allegedly owed on the $80K shown on the Form 1099-MISC, if the company cannot verify that it made such payment to your friend. Not long ago, I represented a client during an audit in which the IRS asserted that he owed additional tax on about $800K of income allegedly paid to him by a cross-country entity that he had never heard of, as shown on a Form 1099-MISC. The IRS dropped the proposed tax adjustment based upon that item after it unsuccessfully attempted to locate/contact the alleged paying entity.

The answer to this question does not establish an attorney-client relationship. Moreover, this attorney is licensed to practiced law ONLY in the State of California. Answers to questions from users in other jurisdictions or states are meant to provide only general information. Users should contact a local attorney in their jurisdiction or state to address their specific tax issue.

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Posted

Did your friend contact the Company. They may have made a mistake on the EIN. If the name is correct and the SS# or EIN is correct, your friend may be the subject of Identity Theft. It would be very rare for a business to pick a random person to issue a 1099.

I really suggest you call the Company and speak with the Controller or bookkeeper.

Good luck!

Ron Cappuccio
www/TaxEsq.com

If you do not like this answer or disagree, please look at one of the other answers provided. It is not necessary for you to try prove this answer is "wrong" or something with which you do not agree. This is a free service for you based on limited facts. Nevertheless, many times you need to consult an attorney with the details to get actual advice specific to your concerns. Do not put too many details in your questions or comments because this makes the information public and could hurt you. Government Regulations contained in IRS Circular 230 regulate written communications about Federal tax matters, including e-mail, between us and our clients. This is another attempt by the government to limit your rights and to extend the control of government over individuals and businesses. Nevertheless, such communications are either opinions or other written communications. This is not an opinion. It is other written communication and was not written to be relied upon, by itself, to avoid any tax penalties. In order to receive assurances of protection from tax penalties from a written communication, you should get an opinion letter. If you would like to discuss an opinion letter relating to any matter, please contact me and I will explain what is involved and what it will cost.

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Posted

Tell your friend to contact the IRS identity theft division. There is a ton of information on irs.gov.

This answer does not establish an attorney-client relationship, Moreover, this attorney is Licensed to practiced law ONLY in LOUISIANA and answers to questions from other jurisdictions or states are meant to provide only general information. Users should contact a local attorney in their jurisdiction or state.

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Posted

Your friend should contact the company and see if it was, perhaps, a mistake. However, if the company states it correctly issued the 1099-MISC, your friend could be the victim of identity theft, as another post suggested. If this is the case, your friend may want to contact an attorney, as he will likely have to produce documents proving he was not the person who received said money. The attorney will be able to help your friend through this process.

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Posted

Your friend can resolve this issue without gong to the company or dealing with this matter as an identity theft issue. The bottom line is that your friend did not receive the $80,000. Simply respond to the IRS notices to that effect. If necessary, your friend can file a tax court peitition or seek assistance from the Taxpayer Advocate. Yes, contacting the company may resolve the issue if the 1099-MISC was issued in error by them and they are willing to correct that error. But, that should just be one flank in your friend's defense. Our firm can also assist as we are only 40 miles from NYC.

Marty Davidoff, emd@taxattorneycpa.com, 732-274-1600. This answer is provided for general information only. You should seek advice from an attorney or tax professional.

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