1099 From the Grave

Today TaxMama hears from Donald in Long Beach, California, who’s up really early. “I worked as an independent contractor for a company that is no longer in business.

The owner has passed away. They sent me a 1099 stating that they paid me $14,000.00. They only paid me $7,000.00. They made a huge mistake. There is no one in the company that can help me since company no longer exists.

What can I do about this?”

Well Donald,

You’re clearly losing sleep over this.

That’s for 2005? You’ve got a 1099 already?
Who issued the 1099? Can you reach their tax professional?

Never mind.

This is what I would do. Include the full amount of the 1099 in your income.

On page 2 of your Schedule C, deduct the extra ,000.
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Attach a BRIEF explanation to your tax return that spells out what you just told me. If there were only a few checks you received that add up to the $7,000, I would list the dates and amounts on that attached explanation.

IRS’s computers will be looking for the income to appear on your tax return in order to match the 1099s they have on file. And it will, so you’ll have no problem there.

They won’t be matching your expenses to anything.
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And odds are, they won’t be reading that attachment either. But if IRS ever pulls that tax return for audit, the explanation will be there. And it will help you avoid trouble.

Just be sure to save all your invoices to that client. And if you had the foresight to make copies of the checks you received, keep them all together in one file, just in case.

And remember, you’ll find answers to questions about reporting income and all kinds of tax issues, free. Where? Where else? At TaxMama.com

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be able to call in on a radio show this morning and Ask TaxMama live. Please click on the subscribe link and join us.


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