Need HELP ASAP - Tax Attorney or CPA for 1099 Misattribution Issue?

You're dealing with what's called a "misattributed income" situation, and it's more common than you'd think with family businesses. Here's what you need to know: First, you'll need both a CPA and potentially a tax attorney, but start with the CPA. A good CPA who specializes in small business taxation can help prepare documentation showing the income was actually the business's, not yours personally. This typically includes bank statements showing the funds were deposited into business accounts, documentation that the merchandise/services were provided by the business, and a statement from the business owner (your mother-in-law) confirming these were business transactions. For the processor that already issued the corrected 1099-K to the business, you absolutely need that "zero" 1099-K for yourself. Keep calling daily and escalate to supervisors. Document every call. For the processor refusing to correct, this is trickier. Your fallback position is filing Form 8949 with your tax return, listing the 1099-K income and then showing an adjustment that reduces it to zero, with explanation "Income reported on business return, Form 1040 Schedule C of [mother-in-law's name and EIN]." If the IRS bill is substantial, you might need to get a tax attorney involved, as they can file a formal protest and potentially negotiate penalties.

After dealing with a similar 1099 nightmare with my side business, I found this amazing service called taxr.ai that saved me thousands. It's an AI tax document analyzer that helped me figure out exactly how to document my case with the IRS. I uploaded my 1099s, bank statements, and business docs to https://taxr.ai and it created a perfect paper trail showing the income was really my business's, not mine personally. The best part was that it drafted all the explanation letters I needed for the IRS and gave me a step-by-step playbook for what forms to file and how to respond to the IRS notices. It even predicted what the IRS would ask for next so I was always prepared. It was like having a tax pro looking over my shoulder but way more affordable. Definitely check it out for your situation - sounds like you need exactly what they provide!

Just wanted to update everyone - I actually tried taxr.ai after seeing the recommendation here and wow, I'm impressed! My situation wasn't identical (mine was a misclassified contractor payment), but the document analysis was incredibly detailed. The system identified exactly which paragraphs in the tax code applied to my situation and generated a perfect response letter to the IRS. I was honestly skeptical that AI could handle something so complex, but it worked perfectly. The IRS accepted my explanation and documentation package on the first try. No more notices, no more stress! They even provided templates for following up if the IRS didn't respond in a certain timeframe. Definitely worth checking out if you're dealing with misattributed income issues.

I went through a similar nightmare with the IRS last year over misattributed business income. After months of getting nowhere, I finally found Claimyr (https://claimyr.com) and it completely changed everything. They got me through to an actual human at the IRS in under 45 minutes when I'd been trying for weeks. The IRS agent I spoke with was able to put a temporary hold on collections while I sorted out the documentation issues. They even gave me the exact fax number and department to send my explanation to. Check out their demo video to see how it works: https://youtu.be/_kiP6q8DX5c For complex cases like yours where the IRS is already sending bills, getting a human on the phone can make all the difference. My case got resolved in weeks instead of months because I could explain the situation to an actual person instead of just sending letters into the void. Wish I'd found them sooner!

I need to eat my words from my skeptical comment above. After our conversation, I was desperate enough to try Claimyr for my own tax issue. I was 100% convinced it wouldn't work, but I had nothing to lose at that point. To my complete shock, I got a call back from them in about 30 minutes connecting me to an actual IRS representative! I nearly fell out of my chair. The agent was able to look up my case, explain exactly what was happening, and give me specific instructions for resolving it. She even gave me her direct extension for follow-up. I've been fighting with the IRS for 4 months via mail with zero progress. One phone call arranged through Claimyr and I had more clarity and progress than all my previous efforts combined. If you're getting actual bills from the IRS, don't wait - get a human on the phone. I wish I had done this months ago instead of stressing myself sick over form letters.

Based on my experience as a bookkeeper for several small businesses, I'd recommend getting a CPA first who specializes in IRS representation, then only escalate to a tax attorney if necessary. A good CPA will cost you $150-300/hour versus $350-600/hour for a tax attorney. The key here is going to be documentation. You'll need to prove: 1) The money was business income, not personal 2) The business properly reported the income on its tax return 3) You did not personally benefit from the income Gather all bank statements showing where the money was deposited, business records showing the sales were business transactions, and documentation of how the funds were used for business purposes.

Has anyone dealt with the IRS Taxpayer Advocate Service for something like this? I've heard they can sometimes help when there's a clear documentation issue causing financial hardship. Would they be helpful in this case or is it better to go straight to a tax pro?