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Hint: 1099s go to the same agency that gets your 1040

December 30, 2008

A California mortgage broker claimed a $74,000 Schedule C deduction labeled "Outside Help (5) 1099". When the IRS audited her, she supported her claimed deduction by providing 1099 copies to the IRS. The Tax Court noted a little problem:

Respondent and the Social Security Administration have no record of the filing of any of the Forms 1099-MISC petitioner submitted to respondent. Further, none of the Social Security numbers on the Forms 1099-MISC which petitioner submitted represented valid Social Security numbers.

Oops. Deduction disallowed.

The Moral: The same IRS that gets your 1040 also gets your 1099s. If you claim deductions using 1099s as your support, the IRS can find out whether you actually filed them. Believe it or not!

Cite: Vasquez, T.C. Memo. 2008-296

Tags: tax court.