Incorrect 1099-NEC

[nnbb7]

I was issued an incorrect 1099-NEC. I requested a correction. The payer refused to do so. I called IRS. They said to file it correctly but make a note of why the difference. How do I add a note to explain the difference?

[VolvoGirl]

What is wrong with the 1099NEC?  Is it too much?  You can add the difference as a Other Misc Expense with a description.  Did they maybe include any reimbursements they paid you?  

[nnbb7]

They are reporting less than they actually paid me.

[AliciaP1]

You just need to correctly report your income from self-employment.  If the 1099-NEC is less than the amount of income you report, the IRS will not flag your return or investigate.  It is a natural assumption that you made additional income from another source that wasn't required to report it on a form.

You can see How do I report income from self-employment? and What self-employed expenses can I deduct? to be sure you are reporting the best situation for your business.

@nnbb7 

[VolvoGirl]

Actually I would just enter your total income as Other self employment income or as Cash or General income.  You don't need to get a 1099NEC or 1099Misc or 1099K.  Even if you did you can enter all your income as Cash.  Only the total goes to schedule C.

How to enter income from Self Employment

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

[TheFunDad]

I am curious about reimbursements. I had that happen this year where I am operating under an accountable plan with an organization. They ask for receipts and records etc and reimburse me. I received a 1099 this year that included all of the reimbursables. If I file based on this I will be responsible for 50% of the tax for business meals (which comes out to quite a lot based on the trips they have me take) I have already contacted the Tax team to let them know.  What are my options?

[DianeW777]

If you are self employed, and the vendor or company that you did work for reimbursed you for expenses, it's common to include those amounts in the 1099-NEC the provide.  It's not a perfect system, however you can deduct your expenses that are included in the income.

You can go back to them and ask for a corrected 1099-NEC so that only the earnings above expense reimbursements are shown.  For that company, either way, they will deduct the amounts paid for your expenses.  Maybe explaining that to the accounting office will help. If they refuse, you can choose to report only the income earned and keep detailed records to prove your numbers.

Otherwise, you are correct that you will pay income tax and self employment tax on the amount of meals expense the IRS does not allow. In other words 50% of your meals will not be allowed to be deducted before tax.

@TheFunDad 

[TheFunDad]

From my research under an accountable plan, they are not supposed to report this as Nonemployee income. Meaning I have provided the organization supporting documentation for all expenses incurred and they have not provided reimbursement until after reviewing documentation. To my knowledge, this being reported on Nonemployee income is actually an error. Is that correct?

[DianeW777]

You do understand the meaning of the 'accountable plan' rules. It should be considered an error.  However the 'accountable plan' is set up for employers and employees which is why this gets confusing for those companies paying a self employed business/sole proprietor individual.  

For this reason I provided the suggestion that will work for you which is to report only the income earned and keep detailed records to prove your numbers and receipts for reimbursements.

@TheFunDad 

[TheFunDad]

Great, thank your for the confirmation.