Should you even get a 1099 form?
Before we can understand how to deal with a missing 1099, it's important to understand if you should even be expecting one in the first place.
1099 forms cover a lot of different types of income, from mutual fund distributions to legal damages to capital gains. But there are two main varieties that freelancers should pay attention to.
When should you get a 1099-NEC?
The main 1099 for freelancers, sole proprietors, and people who run small businesses is Form 1099-NEC, or Non-Employee Compensation. These are filed whenever:
- A client or company pays you at least $600 for work as an independent contractor
- They give you the money directly — say, through direct deposit or check — instead of through a card or app
To receive a 1099-NEC, you’ll need to fill out a W-9 form for your client. Among other details, this form includes your Social Security Number — or Employer Identification Number if you’re billing your client as a business rather than a freelancer.
{write_off_block}
When should you get a 1099-K?
The other form you might receive is a 1099-K. This one applies when you’re paid indirectly, via credit card or app, such as Venmo or PayPal.
In that case, your client doesn’t send you a 1099. Instead, you’ll get one from the company that transferred the money — but again, only if you received over $600.
What about 1099-MISCs?
Thought you’d get Form 1099-MISC instead? The IRS changed the 1099-MISC to only cover “miscellaneous income,” like prize money or rental income.
Self-employment income now comes only from the 1099-NEC or 1099-K. (To learn more about the differences between these tax forms, check out our guide to the 1099-NEC vs. 1099-MISC.)
Will the IRS catch unreported 1099s?
Probably!
Let’s start with some context: For every 1099 you get sent, the IRS also gets a copy.
Sometimes, you might not receive your 1099 — for example, if you’ve recently moved. But that doesn’t mean the IRS didn’t receive its copy.
All the IRS has to do to catch your unreported 1099 income is realize that they have records from a client saying they paid you a certain amount. If that income doesn’t show up on your tax return, the IRS can spot the difference. And it’s really good at that.
{email_capture}
How does the IRS check every 1099?
Every tax return is automatically run through an IRS computer program, which checks for common mistakes and red flags — including missing 1099 income. (If the IRS had to manually audit every single tax form by hand, it probably wouldn’t.)
Remember: As long as your client filed the form, the IRS will have a record of that income, even if you lost your 1099 form. If you suspect your client didn’t submit theirs on time, don’t count on that to save you! They can still file their 1099s late. After all, they’ll have penalties to deal with if they don’t.
Here are a couple of factors that make it possible for the IRS to catch your missing 1099s. Let’s take a closer look.
The IRS gets their copies of 1099s before you file your taxes
When: January 31st
Before 2016, companies had until March 31st to file “information returns” — meaning, the IRS’s copy of income-reporting forms like 1099s and W-2s.
However, that caused a problem: Some taxpayers filed their tax returns as early as the end of January, before the IRS had the documents needed to verify their income.
Now, the IRS’s information returns are due January 31st. That’s the same as the due date for your copy of the 1099 (although you might get it in early February)..
Since the IRS receives these tax documents earlier in the calendar year, they can more efficiently use their matching system to check your reported income against what your clients claimed to have paid you.
The IRS has years to audit your tax return
How long: 3+ years
Even if this automatic system doesn’t catch your unreported 1099 income, the IRS can always go back and check it by hand.
A common misconception is that, if you don’t hear from the IRS within a reasonable amount of time after filing — say, a few months — you’re in the clear.
Unfortunately, that’s not true. The actual time limit for a tax audit is years long. In general, the IRS has three years to audit your tax return. The count starts from either the date you filed or the due date for the return — whichever is later.
Note: That’s actually a minimum. If there’s evidence that you underreported your earnings by over 25%, the IRS has six years to audit your tax return.
What does that mean? Well, say you get away with not reporting 1099 income for three years. If you receive an IRS audit notice within six years, you’re still responsible for that missing income. Only now, you owe even more interest and penalties on it.
In short, the IRS has plenty of time to catch that missing income.
What happens if you miss a 1099 form on your taxes?
First things first: Don’t panic. What to do depends on whether or not you’ve already filed your taxes.
If you haven’t filed your taxes yet
It’s not too late. You can still report your 1099 income without having the actual 1099, so long as you know how much money your client has paid you.
You don’t need to send your copy of the 1099 in with your taxes. That's right — it's not actually a necessary form for tax filing purposes! Just include that total on your Schedule C as if you did have the form on hand, and everything’s golden.
Filing your taxes with Keeper makes it easy to add self-employed income without worrying about having every 1099.
{filing_upsell_block}
If you’ve already filed your taxes
Already sent in your return? It’s still not the end of the world.
While it’s never great to leave off some of your income, you do have the option of amending your tax return to correct the mistake. More on that down below!
Can you still get a refund if you forgot a 1099?
Yes, you can.
You’ll just have to file an amended return by whichever of these is later:
- Within three years of filing
- Within two years of paying your tax bill
Do that, and you can still receive the tax refund you would have gotten if you’d filed correctly in the first place. (Note: This might be less than your original refund if you omitted a sizable amount of income.)
How to add income to your 1099 taxes after you file
Adjusting your already-filed tax returns isn’t actually that complicated! Especially now that the IRS has added electronic filing for amended returns, there’s no reason to stress out about filing a correction.
Wait for any refunds to come in first….
While it’s great to correct your mistakes quickly, you actually don’t want to submit an amended tax return if you’re still waiting to be paid a refund. It confuses the system.
You can even cash your refund check before amending.
What happens if you end up with a smaller refund after amending?
If you end up with a smaller refund, you can simply pay back the difference when you file your amended return.
But don’t wait too long
It’s to your advantage to get it done soon after you get your original refund, even though you aren’t required to. As mentioned above, the IRS has three years to potentially audit you. Technically, you have those same three years to file an amended tax return.
However, the longer you wait, the more interest you’ll have to pay on any money you owe on your corrected return.
In fact, if you’re able to amend your return before the due date for your tax payments, you can avoid late fees and other penalties completely! That’s one argument for getting your taxes done early.
If the IRS catches the mistake: Make your adjusted payment
If you don’t realize your mistake on time, it’s very likely you’ll receive a CP11 Notice.
This is different from being audited (though obviously mistakes on your return can eventually lead to an audit). A CP11 is just the IRS informing you that it believes you made a mistake on your taxes.
The CP11 will:
- Outline the error
- Provide you with a new payment amount
If you agree with what the notice says, simply pay your adjusted payment by the due date.
If you disagree, you can contact the IRS within 60 days of the date on your notice.
If you catch the mistake before the IRS: Fill out a 1040-X
A Form 1040-X is your “redo” form. (The X makes it fancy!). It works pretty much like a regular 1040. The difference: instead of only putting in your total income amounts, you enter:
- Your originally reported totals
- The new totals
- Any difference between them
Since you’re correcting your self-employment income, you’ll need to fill out a new Schedule C and Schedule SE as well. Submit copies of both the original and new versions of those, along with your 1040-X.
You can submit these forms electronically, or by mail. But remember, the sooner the IRS gets your amended return, the better. That’s why it's a great idea to e-file.
Obviously, the best solution is not to miss income from a 1099 in the first place. You can stay ahead of the curve by keeping careful track of both your income and your business expenses using Keeper, which automatically scans your accounts for you.
{upsell_block}
That way, you’ll know what you should report to the IRS before you file, avoiding all the unnecessary stress and extra fees. You can also use the deductions you find to lower your self-employment tax — win-win!
At Keeper, we’re on a mission to help people overcome the complexity of taxes. That sometimes leads us to generalize in our educational content. Please email support@keepertax.com if you have questions.