Recently, I had a client come in who received a notice from the Internal Revenue Service indicating that she had received a 1099-MISC from her employer that she claims never to have received, and that should not have been issued. When I opened up the tax return that I filed for her, it turned out that the amount that the IRS was claiming as non-employee income was exactly the same as her W-2 income. We advised her that we thought that this was a mistake and suggested that she speak with her employer.
She returned to the office with a letter from the employer’s payroll service that was a couple of months old. The letter was actually addressed to the employer. In that letter, the payroll service acknowledged that they made a mistake. They said that when they sent 1099s to the employer’s various contractors, they accidently sent 1099s to the company’s employees as well. They indicated that they had filed corrected 1099s with the IRS and that they did not believe that any of the employees would be hearing from the IRS. Obviously, my client did hear from the IRS and the IRS was looking for money.
I suggested to my client that she take a copy of the letter from the payroll service and a copy of the notice from the IRS to her employer and request that they obtain a copy of the corrected 1099. However, I also advised her that it may be a while before she receives the corrected 1099, and the IRS is looking for a reply now. As a result, I sent a letter to the IRS, under my own signature, explaining what happened, and enclosing a copy of the letter from the payroll service. I am hopeful that my letter will inspire the IRS to check their records and see that they have actually received a corrected 1099. I am hoping to receive a letter from the IRS saying “never mind”. However, my letter will also delay things until my client can obtain a copy of the corrected 1099. I did warn her that she needs to speak with the human resources department of her company, which then needs to contact the payroll service, which then will need to contact somebody in archives. It may be several weeks before she hears back from them, but that is well before the IRS will respond to me.
I also advised my client that most tax preparers would point out that since they did nothing wrong, the letter from the IRS is not their problem. Because most tax preparers are not set up to be writing letters to the IRS and getting into these kinds of disputes with the IRS, most tax preparers would not handle this problem. I have not only handled the problem, but I did not charge my client an additional fee. In this particular case, it would not have been unreasonable for me to do so. The problem that I am fixing has nothing to do with me. Somebody else made a mistake. However, the culture of the law office has bled into my tax practice. I am just not comfortable leaving loose ends untied in any case that I am involved with, including the simple preparation of a tax return.