What if a 1099-NEC is incorrect?
If you’re self-employed, you probably rely on your 1099-NEC forms to report income each year. But what happens when one of those forms is just plain wrong?
It’s more common than you think—and it could mean overpaying your taxes or triggering an IRS notice.
Common Scenario: Overstated Year-End Income
Let’s say you billed a client in December but didn’t receive the payment until January. If that client issues a 1099-NEC for the full amount billed—rather than what you actually received in the tax year—you’ve got a problem.
In the eyes of the IRS, 1099-NEC income is based on what you received, not what was paid or invoiced. So if a client reports $147,000 but you only received $98,000 by December 31, their 1099-NEC is legally incorrect.
What You Should Do if a 1099-NEC is Incorrect?
If you’ve ever wondered, “What if a 1099-NEC is incorrect?”, here’s your step-by-step playbook:
- Contact the client and request a corrected 1099-NEC.
- Send them the IRS guidelines—yes, there's a regulation stating income should only be reported when it’s actually received.
- If they won’t fix it, report the full amount on your tax return but list the overstated portion as an “Other Expense.” Clearly label it “Incorrect 1099-NEC” and include a statement explaining the situation.
- Keep proof—emails, envelopes showing postmark dates, or certified mail receipts—to show the payment was made after the end of the year.
Why This Happens
Many businesses incorrectly issue 1099s based on their own accounting rather than IRS rules. The payer might deduct the full amount from their taxes, but that doesn’t mean they should report it all as income to you in that same year.
Let Ken-Mar Tax Handle It for You
Whether you’re a contractor, consultant, or realtor, Ken-Mar Tax can help you clean up 1099 messes before they become IRS nightmares. We know how to report income accurately, support your deductions, and reduce audit risk.
Schedule your tax consultation today and make sure your 1099s don’t cost you more than they should.
Small Business Tax Services
As an expert in small business tax services and tax consulting Ken-Mar Tax eats, sleeps and breathes small business tax strategies. Being an enrolled agent allows founder, Ken Weinberg, to represent you to the IRS - something only a CPA, tax attorney and Enrolled Agent can do. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. It also means he is continuously being updated on the new IRS tax codes and taking classes from the IRS that provide guidance on how to file returns so that they are not "flagged."
When you get your taxes prepared by Ken Mar Tax you also have the option to purchase the Tax Audit Protection Plan to avoid the extra costs of paying for audit representation. If you are audited by the IRS, State of Ohio or local taxing authorities, Ken-Mar Tax will meet with the taxing authorities on your behalf to negotiate a settlement for you. The fee covers all costs up to the Appeals level, including up to 15 hours of correspondence with the auditing party – either the IRS, State of Ohio or locality.
