What to do if 1099-NEC is wrong? My sister's salon underreported her income
Title: What to do if 1099-NEC is wrong? My sister's salon underreported her income 1 Hi everyone! My brother is a self-employed barber who rents a chair at a local barbershop, so they pay him as an independent contractor. He's always gotten a 1099-NEC from them showing his earnings. But this year, the amount on his 1099 is WAY off - it's showing almost $4,800 less than what he actually earned based on his own records. When he contacted the shop owner about it, they basically told him "don't worry about it" and that they don't need to issue a corrected form. The weird thing is, apparently several other barbers at the shop have the exact same issue this year. I'm trying to help him figure out what to do. Should he just report the additional income separately on his Schedule C as miscellaneous income? Or should he push harder for a corrected 1099-NEC? I'm concerned because it seems sketchy that the barbershop is underreporting what they paid to multiple contractors. Any advice on handling incorrect 1099-NECs would be super helpful! Has anyone dealt with this before?
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StarSeeker
12 You definitely need an accurate 1099-NEC. When your brother files his Schedule C, he should report his ACTUAL income, regardless of what the 1099 shows. The IRS matches 1099 forms with tax returns, so if he reports more income than what's on the 1099, it likely won't trigger any issues. However, the barbershop is required by law to provide accurate 1099s. Your brother should formally request a corrected 1099-NEC in writing (email or letter) and keep a copy. If they refuse, he should document all his income carefully - bank deposits, payment app receipts, appointment books, etc. When filing, he should report his full, accurate income on his Schedule C. He doesn't need a separate "miscellaneous" category - it's all business income. He might want to attach a simple explanation noting the discrepancy between his actual income and the incorrect 1099.
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•19 Thanks for this advice! I'm wondering though - could there be some tax benefit for the barbershop to underreport what they paid out? Is that why they might be reluctant to correct it? And should my brother report this to the IRS somehow?
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•12 There's no legitimate tax benefit for them to underreport payments to contractors. This could be an accounting error, but since it's happening to multiple people, it's concerning. The barbershop needs to report these payments accurately for their own tax compliance. Your brother doesn't necessarily need to report this to the IRS directly. By filing his taxes with the correct income amount, he's already creating a record of the discrepancy. However, if the barbershop continues to refuse to issue a corrected form, he could file Form 3949-A (Information Referral) to report potential tax law violations.
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7 After reading this post, I wanted to share something that helped me in a similar situation with incorrect tax documents. I discovered taxr.ai (https://taxr.ai) when I was dealing with a messed up 1099 from a client last year. It's an AI tool that analyzes tax documents and can help identify discrepancies. I uploaded my payment records and the incorrect 1099, and it gave me a detailed report showing exactly what was missing and how to document it properly. The best part was it helped me draft a formal correction request letter to send to my client. When they still wouldn't correct it, the report helped me document everything correctly on my tax return.
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•4 Does it work for other tax forms too? I got a W-2 that I think has my retirement contributions wrong but I'm not sure how to prove it.
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•16 I'm a little skeptical about using AI for tax stuff. How accurate is it really? And does it just tell you what you already know (that the numbers don't match) or does it actually help resolve the issue?
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•7 It absolutely works for other tax forms too! It can analyze W-2s, 1099s (all types), K-1s, and other tax documents. It compares them against your records and highlights discrepancies like incorrect retirement contributions. Regarding accuracy - I was skeptical too at first. But it's not just pointing out mismatches - it actually gives you specific guidance based on IRS rules. In my case, it showed me exactly how to document everything on my return and generated a detailed explanation letter I could attach to my tax filing. The step-by-step instructions for handling discrepancies were what made it worth it for me.
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16 I have to follow up on my skeptical comment about taxr.ai - I actually tried it after posting here and wow, I'm really impressed. I had a similar issue with a 1099-MISC that was off by about $3,200 and it helped me navigate the whole situation. The analysis pinpointed exactly where the discrepancy was (the company had omitted December payments) and generated documentation I could use both for my records and to send to the company. I ended up getting a corrected 1099 within a week after sending their template letter. Even if I hadn't gotten the correction, I felt much more confident about reporting the correct amount on my return with their documentation. Definitely worth checking out if you're in this situation with incorrect tax documents!
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8 Has your brother tried calling the IRS directly about this? I was in a similar situation last year with an incorrect 1099-NEC and spent WEEKS trying to get through to someone at the IRS for guidance. Finally found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes instead of waiting on hold for hours. The agent confirmed I should report my actual income regardless of what the 1099 said, and gave me specific instructions on how to document everything. They also sent me information about what to do if the business refused to correct the form. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c
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•3 Wait, how does this actually work? The IRS phone lines are impossible to get through - are you saying this somehow gets you to the front of the queue? That sounds too good to be true.
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•14 This feels sketchy. Why would you need a service to call the IRS? I bet they charge a fortune and all they do is call and wait on hold for you. You could just put your phone on speaker and do the same thing.
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•8 It's not about cutting the line - they use technology that continuously redials and navigates the IRS phone tree until it gets through, then it calls you when an agent is actually on the line. I tried calling myself for three days and never got through. I completely understand the skepticism - I felt the same way! But when you've been trying to get through for days or weeks with no success, having someone else handle the endless redialing and waiting becomes worth it. The IRS is severely understaffed, and some people literally can't sit around all day trying to get through when they have work or other obligations.
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14 I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself since I've been trying to reach the IRS for two weeks about an audit notice. I figured if it didn't work, I could come back here and call it out. But it actually worked exactly as described. I submitted my request around 7:30am, and by 8:15am I got a call connecting me directly to an IRS agent. No waiting on hold at all. The agent was able to explain my audit notice and give me clear instructions on what documentation to submit. What would have taken me potentially weeks of frustration was resolved in 45 minutes. For anyone struggling to reach the IRS, this service is legitimate and works as advertised. I'm genuinely surprised and relieved.
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5 Just to add another perspective - I'm a small salon owner, and sometimes there are legitimate reasons for 1099 discrepancies, though $4,800 seems excessive. Sometimes business owners count credit card processing fees or booth rental against contractor payments. This isn't correct practice, but it happens. I would recommend your brother check his payment records carefully - does he have receipts for every payment? Bank deposits? Cash app records? Having solid documentation is crucial regardless of whether the salon corrects the form or not.
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•22 Do credit card fees really add up to that much though? And even if they do, isn't it illegal to deduct those from reported contractor payments? I thought the 1099 was supposed to show the gross amount paid.
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•5 Credit card fees typically run 2-3%, so no, they wouldn't account for a $4,800 discrepancy unless your brother earned well over $150,000 from this one shop. You're absolutely right that the 1099-NEC should show the gross amount paid to the contractor before any fees. What sometimes happens (incorrectly) is that salon owners might deduct booth rental fees or product charges before calculating the 1099 amount. This is incorrect - those should be handled separately, and the 1099 should reflect the total payments made to the contractor.
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18 Make sure your brother keeps immaculate records going forward! I'm a barber too and I use a simple spreadsheet where I record EVERY transaction, including tips. I also take pictures of daily receipts and keep all payment app notifications. This has saved me twice when dealing with incorrect 1099s. Remember that even if the barbershop doesn't fix their mistake, your brother is legally obligated to report his full income. The last thing he wants is an audit where he can't substantiate his actual earnings!
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•1 Thank you all for the advice! I'm showing my brother this thread tonight. He does keep pretty good records with a booking app that tracks all his appointments and payments, plus he has his bank statements showing deposits. I think we'll start with a formal written request for a corrected 1099-NEC, and if that doesn't work, he'll report the full income anyway and keep all his documentation ready. And maybe check out some of these services you've all recommended to make sure he's handling everything correctly!
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