1099-NEC Box Marked Incorrectly - How to Report for Taxes?

I just received my 1099-NEC in the mail yesterday and noticed that the box for nonemployee compensation is filled out wrong. The company I did freelance graphic design for marked Box 1 with $5,875 but I actually made $7,340 from them last year. They also checked Box 2 for direct sales over $5,000 which doesn't apply to my work at all - I never sold consumer products to anyone! This is my first year working as an independent contractor and I'm already confused about how to handle this for my taxes. Do I need to contact the company to get them to fix this? Will I get in trouble with the IRS if I report a different amount than what's on the form? I'm planning to file in early February and really don't want to mess this up.

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20 comments

Aaron Boston

•8M

This is actually pretty common with 1099-NECs. You should definitely contact the company that issued the form and ask them to correct it. They need to issue you a corrected 1099-NEC with the right amount in Box 1 and remove that Box 2 checkmark. While you're waiting for the correction, gather all your own income records - invoices, payment confirmations, bank deposits, etc. You should report your ACTUAL income on your Schedule C, not just what's on the incorrect 1099-NEC. The IRS actually expects you to report all your income regardless of what forms you receive. If the company doesn't issue a corrected form before you need to file, go ahead and report the correct $7,340 on your Schedule C. Just be prepared to explain the discrepancy if the IRS asks about it in the future. Having your own thorough records is your best protection.

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Aaron Boston

•8M

The Box 2 marking is definitely incorrect based on what you've described. This box is specifically for direct sales of consumer products where the company paid you at least $5,000, and you'd typically be selling these products to buyers for resale. As a graphic designer, this wouldn't apply to you. If the company doesn't correct the form, you don't need to file any additional forms related to direct sales. Your Schedule C should clearly indicate you're providing graphic design services. If you're worried, you can attach a simple statement to your return explaining the error on the 1099-NEC you received.

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Chloe Zhang

•8M

I ran into this exact same issue last year and spent hours trying to figure it out. Then I found taxr.ai (https://taxr.ai) which was a lifesaver. I just uploaded my incorrect 1099-NEC and my payment records, and it gave me step-by-step instructions on exactly how to report everything correctly on my Schedule C. It even generated a sample explanation letter to keep with my records in case the IRS had questions. The tool showed me which boxes on my tax forms needed my actual income amount versus what was reported on the 1099, and explained the whole thing in plain English. Saved me from what would've been a major headache!

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Chloe Zhang

•8M

Yes, it works with multiple 1099s - you can upload all of them, and it will help you reconcile everything together for your Schedule C reporting. It even helps identify situations where you might have duplicate reporting or missing income. The tool actually explains exactly what Box 2 means and the implications of it being incorrectly marked. It doesn't eliminate the need to request a corrected form, but it walks you through exactly what to do if you don't get the correction in time for filing. It gives you specific language to use in your tax return documentation to explain the discrepancy.

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Adriana Cohn

•8M

I was really worried about my messed up 1099-NEC situation so I tried taxr.ai after seeing it mentioned here. Honestly wasn't expecting much but it was surprisingly helpful! The system identified the Box 2 issue immediately and showed me exactly what to do. It created a perfect explanation letter that I attached to my return explaining why my Schedule C amount differed from the 1099. Also gave me a checklist of steps to request the correction from my client. I filed three weeks ago with confidence and just got my refund yesterday - no issues at all. Definitely using it again next year!

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Jace Caspullo

•8M

Had the same problem but for me it was even worse - my client refused to send a corrected 1099-NEC! I spent days trying to reach the IRS for guidance but couldn't get through. Finally tried Claimyr (https://claimyr.com) and watched their demo (https://youtu.be/_kiP6q8DX5c) - they actually got me a callback from the IRS in under 2 hours. The IRS agent confirmed I should report my actual income on Schedule C and keep detailed records of the discrepancy. She even gave me specific advice about documenting my request for correction from the company. Would've been waiting on hold for hours without Claimyr!

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Jace Caspullo

•8M

It doesn't put you in a queue - it uses their system to request a callback from the IRS. You enter your phone number, and they take care of the waiting part. When an agent becomes available, you get a call directly from the IRS. I was skeptical too! I had tried calling multiple times over three days and couldn't get through. With Claimyr, I got an actual callback from an IRS agent in about 90 minutes. The agent identified herself as being from the IRS and answered all my questions about the incorrect 1099-NEC. Nothing fake about speaking directly with an IRS representative who helped resolve my issue.

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Nathaniel Mikhaylov

•8M

I need to eat my words. After my skeptical comment, I was still desperate about my 1099 situation so I tried Claimyr anyway. Got a call back from the IRS in just over an hour. The agent was super helpful about my mismarked 1099-NEC. She explained that I should definitely report my actual income on Schedule C, and suggested I include a written statement explaining the discrepancy. She also gave me the exact IRS notice number that explains what to do when you can't get a corrected 1099. Would've spent days trying to find this info on my own!

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Henrietta Beasley

•2M

I went through something very similar last year! My 1099-NEC had the wrong amount in Box 1 ($3,200 instead of $4,850) and also had Box 7 marked incorrectly. Here's what I learned: 1. Definitely try to get a corrected form first - send a written request to the company with your actual payment records attached. Give them about 2-3 weeks to respond. 2. If they don't issue a correction before you need to file, go ahead and report your actual income ($7,340) on Schedule C. The IRS wants you to report all income you actually received, regardless of what the 1099 says. 3. Keep detailed records of EVERYTHING - your invoices, contracts, payment confirmations, bank deposits, and your request for correction. Also document any communication with the company about the error. 4. Consider attaching a brief statement to your return explaining the discrepancy. Something like "1099-NEC received shows $5,875 in Box 1, but actual payments received were $7,340 as documented in attached records." The Box 2 marking is definitely wrong for graphic design work - that's only for direct sales of consumer products. Don't worry too much about it affecting your filing, just make sure your Schedule C clearly shows your business as graphic design services. You're being responsible by catching this early. Most people don't even notice these errors!

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