In the spring of 2023, James and his wife, Joyce, received a notice from the IRS regarding their 2021 tax return. The IRS notice stated that the couple owed over $40,000 for failing to report non-employee compensation James had received. James and Joyce were shocked and confused by this letter.
After the initial receipt of this letter, James took several steps to investigate what happened. It turned out that he had never been issued a 1099-NEC by the company he had worked for, so he reached out to the issuer to see about getting this document. The issuer sent him the documentation, but James was shocked by the numbers they were listing. After reviewing his records, James confirmed that he made only $900 working for this company; however, on the 1099-NEC, they claimed that they paid him $9,000. This was obviously a typo, but James was unsure about the next steps he needed to take to resolve his concern with the 1099 issuer and the IRS.
Fortunately, Joyce remembered they had purchased TaxAudit’s Audit Defense upon filing their 2021 return. She immediately called TaxAudit to report the notice and was put in touch with their case coordinator, LaShawna. LaShawna let Joyce know that she and James were in good hands. The first thing they needed to do was send a copy of the IRS notice and the corresponding tax return.
Once this documentation was received, their case was assigned to our tax professional, Lenka, who immediately jumped into action. She could see clearly that the issued 1099 was incorrect. She encouraged James to reach out to the issuer and see if they could send a letter confirming their mistake. Over the next several weeks, James made multiple attempts to contact the issuer, but the company refused to re-issue a revised 1099 with the correct amount listed or write a letter confirming the $9,000 amount was incorrect.
Fortunately, Lenka had a proposal for another route they could take. James could give the IRS permission to contact the company that issued the 1099 on his behalf. He agreed to this option, so Lenka prepared a response with all the appropriate documentation. This included James’ signed document giving the IRS permission to contact the 1099 issuer on his behalf. After our QC team reviewed the response package, it was sent off to the IRS. Now, all James and Joyce could do was wait.
Fortunately, the IRS analysis of their documentation and response were swift. After reviewing all the information Lenka had submitted, the IRS issued a recomputed notice stating that James and Joyce only owed $150, as opposed to the $40,000 listed on the original notice.
The couple was ecstatic at this news! They extended their gratitude to Lenka, sharing that they could not have achieved this wonderful outcome without her knowledge, compassion, and swift action.
*Some names and identifying details have been changed to protect the privacy of the individuals.
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