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  1. #1
    Join Date
    Nov 2007
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    10

    Default How to Correct Income Reporting

    I filed tax return last year but I think there is a mistake ...I got 1099-misc from class action law firm because they forgot to submit my name in the list they provided to ex employer so to make up for this mistake they paid me $1000 via check and gave me 1099-misc with box 7 - non employee compensation because of this when I filed taxes I chose to report that as other income and now I realized this income did not qualify to receive social security credit ....
    so how do I correct this? I know it is for back wages that I was suppose to get payment directly from my ex employer and not from law firm and if it it did happen as it was suppose to be ...employer would have withheld my share social security as well as medicare tax ...
    now I want to correct this..

  2. #2
    Join Date
    Mar 2013
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    18,340

    Default Re: How to Correct Incoming Reporting

    I don't think you can correct it because there was nothing wrong with the way you did it.

    The $1000 was a settlement from a lawsuit, right?

    That means it wasn't wages and not subject to withholding or FICA even though it was taxable income.

    Even if the ex employer had paid you direct it still wouldn't have been subject to withholding or FICA, I think.

    You can ask a tax pro or keep watching this space for other comments.

  3. #3
    Join Date
    Nov 2007
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    Default Re: How to Correct Incoming Reporting

    Well there was a settlement that employer should pay 'back wages' to all employees in the class. So I was expecting payment from ex. employer but class counsel representing me and others in class forgot only my name so I did not get payment from employer. When I asked lawyer she said oh we forgot to give your name that's why employer did not pay ...so now to make up for our error we will pay via check its ok? I said yes....so she sent me check of $1000 (which is a lump sum amount not my actual back wages) and she sent me 1099-MISC along with it...and I did not until now that fica was not paid in the whole process.

  4. #4
    Join Date
    Mar 2013
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    18,340

    Default Re: How to Correct Incoming Reporting

    Oh, the lawyer paid you to atone for her error. Not sure I noticed that before.

    I don't think that changes anything.

    A thought just occurred to me that you could amend your tax return and report the $1000 as self-employment income and pay self-employment tax on it. That's the equivalent of FICA.

    I'm not sure it would be worth the effort or the cost of a tax pro as your contribution would amount to a fraction of the $1000 and likely wouldn't be significant by the time you retire and start collecting social security.

    Might be best to just leave it alone.

  5. #5
    Join Date
    Nov 2007
    Posts
    10

    Default Re: How to Correct Incoming Reporting

    I think I can amend the return myself and yes I have to pay about 15% se tax on it.....you are right may be its not much for retirement benefits

  6. #6
    Join Date
    Oct 2006
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    16,474

    Default Re: How to Correct Incoming Reporting

    Quote Quoting adjusterjack
    View Post
    Oh, the lawyer paid you to atone for her error. Not sure I noticed that before.

    I don't think that changes anything.

    A thought just occurred to me that you could amend your tax return and report the $1000 as self-employment income and pay self-employment tax on it. That's the equivalent of FICA.

    I'm not sure it would be worth the effort or the cost of a tax pro as your contribution would amount to a fraction of the $1000 and likely wouldn't be significant by the time you retire and start collecting social security.

    Might be best to just leave it alone.
    Because it was technically a settlement from the attorney to correct an error that the attorney made, it would not be wages. However, it would be taxable because it replaced taxable income. It however is not non-employee compensation and box 7 should not have been checked. Box 3 should have been checked instead.

    Rather than amending the tax return, the OP should ask the attorney to correct the 1099, and to send the corrected copy to the IRS. Otherwise what is likely to happen is that about a year from now the OP will receive a CP-2000 letter from the IRS pointing out that self employment taxes should have been paid on the money.

  7. #7
    Join Date
    Nov 2007
    Posts
    10

    Default Re: How to Correct Incoming Reporting

    Quote Quoting llworking
    View Post
    Because it was technically a settlement from the attorney to correct an error that the attorney made, it would not be wages. However, it would be taxable because it replaced taxable income. It however is not non-employee compensation and box 7 should not have been checked. Box 3 should have been checked instead.

    Rather than amending the tax return, the OP should ask the attorney to correct the 1099, and to send the corrected copy to the IRS. Otherwise what is likely to happen is that about a year from now the OP will receive a CP-2000 letter from the IRS pointing out that self employment taxes should have been paid on the money.
    Yeah this sounds like way to go...by the way when you said OP should ask attorney ...just making sure I should ask attorney to correct 1099 ...what exactly OP means?

    - - - Updated - - -

    Quote Quoting llworking
    View Post
    Because it was technically a settlement from the attorney to correct an error that the attorney made, it would not be wages. However, it would be taxable because it replaced taxable income. It however is not non-employee compensation and box 7 should not have been checked. Box 3 should have been checked instead.

    Rather than amending the tax return, the OP should ask the attorney to correct the 1099, and to send the corrected copy to the IRS. Otherwise what is likely to happen is that about a year from now the OP will receive a CP-2000 letter from the IRS pointing out that self employment taxes should have been paid on the money.
    Ok I understand that if box 7 is chosen than I have to pay se tax and if box 3 is chosen than it is not subject to se tax ...box 3 means only regular income tax.
    But in my case...I do want this income to be reported to social security and medicare ....so what is the best option for that? should I amend tax return and file se tax or request attorney to send me a different type form in which she needs to pay half of social and medical taxes? if that is the case what form she should give it to me?
    If she did not make a mistake and got directly from employer that is how I would have got it..where employer pays half of social security and medicare tax and half would be withheld from my back wages pay check.

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