Posted on June 28, 2006 at 17:51:24:
All 1099 tax forms – on investments, retirement accounts, non-employee compensation and the like – are supposed to be sent out by January 31. Ideally, each recipient should check those figures and catch any mistakes right away. If a mistake is caught in time, the payer can send a corrected form to the IRS and to the payee.
What if there is a mistake on the form, and it wasn’t corrected? The IRS cross-checks the figures on your income tax return with those sent in by employers, banks, brokers, etc. If figures don’t match, a notice is automatically generated.
What’s the right thing to do if the figures don’t match? Enter the wrong figure, the one that appears on your 1099 – but then adjust the problem by writing in the amount of the error below that figure and then add or subtract to reach the right number. And then, of course, you’ll want to enclose an explanatory letter with your income tax return.