Statue of Limitations on a corrected 1099 misc?

sputnik07February 23, 2007

Maybe I am over reacting here:

I owned a catering business from 1986 to 2001.

Today I received in the mail a payment check of $1,525.06 from company XX for a job that was invoiced by my business on 4/29/99! This is mysterious - I can't imagine an outstanding payment of this size slipping under my radar....

As a DBA business I always received a 1099 misc. from company XX. I received a 1099 misc from company XX for 1999 which did not include this mysterious $1,525.06. My 1999 income taxes paid were based on the 1099 misc. amount that company XX reported paid to me for 1999.

Can company XX now generate a corrected 1099 misc. including this extra amount for the year 1999? Is there some kind of statute of limitations on companies generating corrected 1099 misc for independent contractors?

Of course I didn't keep my business records from 1999 - I destroyed them a couple of years ago, so I can't check any thing.

Any thoughts you all have would be appreciated.........

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How did you set up that business' accounting for tax purposes? If it were cash based,, I suspect you just treat it as 2006 business income, even if there is no other business in 2006. Or 2005 or 2004, etc

No clue if you used inventory (is that the term?) accounting.

    Bookmark   February 24, 2007 at 12:49AM
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Have you call this company to ask why they are sending you money now? That would be my first step.

    Bookmark   February 24, 2007 at 6:35AM
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I did business as a Doing Buisness As type of business - a sole proprietorship reported under my social security number. On my income tax my business accounts were reported on a schedule C. Not sure about inventory accounting.

My concern is that if Company XX can generate a new 1099 misc. for 1999 I might be liable for back taxes, penalties etc. and I no longer have my business records.
I will call company XX on Monday and see why they are sending this money years later.

    Bookmark   February 24, 2007 at 12:15PM
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You might also want to call the IRS. I've actually had pretty good luck with getting advice over the phone from them without having to identify myself.

I do know that you can generally throw out tax records after 3 years because that is the usual lookback period for audits, but I'm not sure how you should deal with income that comes in years later. Hopefully, the IRS will tell you to forget about it.

    Bookmark   February 24, 2007 at 3:44PM
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I thought that if the payment is dated 2007, you claim the income in 2007.

    Bookmark   February 24, 2007 at 4:35PM
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Luann, that's why I asked if the accounting ran "cash based". In that system, there is no inventory and no "value" to accounts receivable, no option to "write off" uncollected invoices, etc. Nothing matters but the cash that year. The business income is the cash brought in minus the expenses. Simple. And that gets entered as business income (or loss) on the 1040 line 12 along with a Schedule C showing the details.

For my business, I am not incorporated and it all goes on my social security number, also use Schedule C. I may still have payments trickle in after I close it down. That's how I will handle it, even if a payment comes 5 years later.

So Sputnik, those years you had the business, what you were owed had no bearing on your taxes? Sounds like it was cashed based accounting also. I think it may be as simple as you had business this year too. Surprise, surprise.

I think you treat it as 2007 business income. (pretty simple schedule C this time). But I am not an accountant. And the IRS can certainly be illogical. But my guesss is you are fine.

    Bookmark   February 24, 2007 at 5:24PM
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I am not a expert but I belive that you can only get a 1099 for the income paid you in the year it is paid.

You should show this as business income for 2007 and they should 1099 you for it as income in 2007.

They can not go back an change a 1099 for a year they did not pay you.

And I do disagree on how long you should keep your tax records. When I signed up for social security they ask me why I had such a dip in income for 1979 and I said I had no idea but would look it up. With out that W2 in my old files my social security check would have been $27.00 less each month. That's $324.00 a year or close to ten thousand if I live to be 90.

I would be calling then and asking why they didn't pay you intrust for the 6 or 7 years they didn't pay you or you could request copy's of your 1999 tax returen from the IRS and file a corrected return for that year.

Or they may say it was paid to you in error and want you to send it back. By tossing your records you can't prove they owe it to you.

Good luck

    Bookmark   February 25, 2007 at 12:45AM
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Sputnik, I may have misunderstood.

I am assuming that next year company X will issue you a 1099 showing the $1525.06 as a 2007 payment.

If they send you a 'corrected' 1099 for 1999 you would have a bunch of potential tax problems. But I really don't see how they could reasonably do that because they didn't make this payment to you until 2007.

Again, in a cash based business, taxation is solely and simply about the money you get in the year you get it. From Uncle Sam's and busunes X' perspectives, you are back in business in 2007.

But you should find out more. When you call company X, the important question is not why they are sending you the money so late (though it is an interesting question) but whether they will be sending you a 2007 1099 (vs an amended 1999 1099). I will be very surprised if they intend to send you an amended 1999 1099. Let us know.

    Bookmark   February 25, 2007 at 11:10AM
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I'm pretty sure the statute of limitations on taxes is 7 years. So, they couldn't issue an amended 1099 for 1999. It's 2007 now--8 years later. So, no penalties/back taxes.

They can, however, issue one for this year.

    Bookmark   February 27, 2007 at 12:46PM
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