I have a client who worked (as a secretary) for a large real estate agency. She was an employee and received a W-2 but while she was employed she referred some friends who wanted to sell their home. The sale was successful and the real estate agency gave the secretary a small commission of $525. The agency then issued her a 1099-MISC for $52,500!!!

The agency refuses to correct the 1099-MISC and the IRS is now starting to take collection action on this incorrect amount!

Does anyone have any suggestions on how to deal with this situation?

Are their any penalties or actions that can be taken against the agency for issuing an incorrect 1099-MISC and then refusing to correct it?

asked 14 Oct '09, 03:26

TaxQueries's gravatar image

TaxQueries ♦♦
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edited 29 May '10, 06:31

Take a look at Portillo v. Commissioner, 988 F2d 27. Portillo got a 1099 that was wrong and the company refused to correct. His records proved he was right and the IRS was forced to roll over. The issue is one of a "Rebuttable Presumption" being the result of a 1099.

(10 Jan '10, 21:18) EAgent

If you explain the situation to the Internal Revevue Service and can submit documentary evidential proof that only $525 was received while the Company issued Form 1099-Misc for $52,500, and will not correct the error appears to be an indication of filing a frivolous information return as well as a negligent willful intentional disregard for the Internal Revenue Code and underlying Treasury Regulations.

If you do not get anywhere with the normal customary communication process, there is a Taxpayer Advocate that ensures problems and issues are resolved promptly and impartially handled when the "normal" communication process fails.

Here is the link: http://www.irs.gov/advocate/index.html

Ms. Nina Olson in the National Taxpayer Advocate and reports directly to Congress.

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answered 15 Oct '09, 03:18

Brent%20Berkman's gravatar image

Brent Berkman
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My opinion is the real estate company is in for an audit. They can send in a revised 1099 form to her, but since she was an employee, then she never should have received a 1099 in the first place.

A 1099-Misc is for NON EMPLOYEES. She is obviously an employee, so she should have had this included on her W-2 and NOT a 1099.

What Form 1099 did they give her?

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answered 19 Oct '09, 19:18

SandySea's gravatar image

SandySea
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Just request an audit reconsideration. If that doe not work contact taxpayer advocate. They should have no problem resolving this issue.
Had she responded to the initial contact and requested an in person audit I would have recommended calling the company with the RA/TCO there on speaker phone. EAgent is correct about Portillo. Had she responded to the intial contact stating the correct amount it would have been up to IRS to confirm the difference.

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answered 04 Jun '10, 23:41

Toni%20McIntyre%20CPA's gravatar image

Toni McIntyr...
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This should have been included on her W2 not a 1099. You can file a SS8 and have her determined to be an employee then the employer will be responsible for the taxes on the monies and they will respond real fast.

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answered 25 Oct '09, 20:23

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Cathi
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1

Irregardless of the emplyee versus independent contractor issue, the information return was issued for $52,500 instead of $525, and is the more pressing of the issue. If $525 was all that was received, the employee issue, while an important consideration, is rather moot.

(25 Oct '09, 21:28) Brent Berkman

If she was not a licensed real estate agent, the broker probably violated state laws for paying a commission or referral fee to a none licensed person. Which may be more serious than the tax issue. And a better leverage to get it corrected

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answered 21 Feb '11, 03:45

Crog's gravatar image

Crog
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If the agency refuses to issue a corrected 1099, then I think your only recourse is to file suit again the agency. I would then inform the IRS of the lawsuit, and where it stands (the lawsuit) and hopefully they would get off their high horse for a few months to see if the agency is coerced into issuing a corrected 1099. I know this all costs money, but you would need to consult an attorney as to whether there is any way to recoup attorney fees, etc.

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answered 14 Oct '09, 05:30

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jim
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I would probably do all of the things mentioned above, but I believe to file the tax return for the client until this gets resolved I would file a schedule C for the client using the $52,500 as gross income and then under the expenses I would list the overstatement of 1099 and the name of real estate company and EIN and attach a copy of the letter and certified receipt that you notified the company that it was wrong.

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answered 05 Jun '10, 12:58

Eddie%20Douglas%201's gravatar image

Eddie Douglas 1
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I would have added a statement to the original return, along with whatever documentation was available to support the receipt of $525, but I would not confuse the issue by reporting income that was not received. That's arguably filing an incorrect return.

(05 Jun '10, 17:03) Tom
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Asked: 14 Oct '09, 03:26

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Last updated: 21 Feb '11, 03:45