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[Shakhnovsky]

Hi all. I am one year into the business, and still learning. I had previously ordered direct mail leads from a company that was connected with my IMO in 2022. There was a big mess with the service, and was ultimately given a refund for the $2,500 spent. I had just received a 1099 from the company who was selling the leads for the $2,500 refund. Is this normal?

 

[scagnt83]

Hi all. I am one year into the business, and still learning. I had previously ordered direct mail leads from a company that was connected with my IMO in 2022. There was a big mess with the service, and was ultimately given a refund for the $2,500 spent. I had just received a 1099 from the company who was selling the leads for the $2,500 refund. Is this normal?

No. Not normal. Not legal either.

A refund of services you bought, is not a payment for work performed.

They are trying to illegally write off the payment from their taxes as employee compensation.

Tell them you didnt fill out a W9 form. You never performed any services for their company in return for the refund of your payment. Therefore you will report them to the IRS and DOL if they do not cancel the 1099 filing.

You can actually contest a 1099 if you do not agree that its valid. There is a form to do so. Tell them you will do that along with reporting them to the IRS and DOL.

 

[rmhaire]

No. Not normal. Not legal either.

A refund of services you bought, is not a payment for work performed.

They are trying to illegally write off the payment from their taxes as employee compensation.

Tell them you didnt fill out a W9 form. You never performed any services for their company in return for the refund of your payment. Therefore you will report them to the IRS and DOL if they do not cancel the 1099 filing.

You can actually contest a 1099 if you do not agree that its valid. There is a form to do so. Tell them you will do that along with reporting them to the IRS and DOL.

Scagnt83 is correct. A DOL complaint will most likely trigger a sit down with their local DOL office. For them not you. The DOL don't play.

 

[DHK]

The only other (incorrect) thought could be that they think they are charging off a debt.

Unpaid charged off debt is considered income to the debtor and reportable.

Still not correct, but that could be a given mentality behind why they did that.

 

[Allen Trent]

did it cross tax years?

There has been changes by the IRS & more directives that many, many more entities have to issue 1099s . I know an agent that had to issue 1099's to a carrier for charge-backs to be able to properly deduct the payment from his current year tax Schedule C because he had already counted the revenue in the prior tax year Schedule C (I honestly dont believe it was needed as you normally dont have to issue a 1099 to a corporation)

Also, did you merely buy leads or did you contract the lead company to provide the mailing service or making phone calls. that may also be a difference as to when/why a 1099 was issued. What type of business entity are you? Also, some lead companies have to issue 1099-NEC when the leads being bought are being re-sold to individuals in the downline (not sure how they would know--but I believe that is IRS regs on reselling)

in reality, it doesnt matter. If you took a business expense deduction for the entire originally amount paid for the leads, the 1099 is merely offsetting it back to your original net amount. only thing a 1099 does is notify the IRS to what your required to do on your business taxes in regard to tracking revenue sources & net expenses

 

[DonP]

Very easy to fix . Write off the amount on line 2 of sch c ( returned items ) to offset it . If I've ever had to write a check for a debit balance that's what line I've used . I've already paid tax on it and I'm simply writing off what I paid back . IRS won't question

 

[Allen Trent]

The leads were purchased, and refunded in 2022, and the 1099 is for 2022.


I am an individual broker. Carriers pay commissions directly to me. I was required to sign a lead purchase agreement in order to buy fixed price direct mail leads from the company.

Yeah, that does seem odd, but doubt it is illegal. It would be different if they issued an inaccurate amount.

From all I can see, it is the offset to your original total paid. Had you not gotten the 1099, you still would have had to list your total lead expense receipt as a business expense & the credit as a revenue or offset to the original total.

I wouldn't worry about it & if anything you can call the company accounting dept & ask why you got it. But, they will have to issue a corrected 1099 & doesn't mean the IRS will never see the 1st one

 

[Allen Trent]

Very easy to fix . Write off the amount on line 2 of sch c ( returned items ) to offset it . If I've ever had to write a check for a debit balance that's what line I've used . I've already paid tax on it and I'm simply writing off what I paid back . IRS won't question

I think this is the opposite. He didn't pay the lead company more money, he received money from them. So, if anything, he would put a negative amount on line 2.

 

[DonP]

I think this is the opposite. He didn't pay the lead company more money, he received money from them. So, if anything, he would put a negative amount on line 2.

Like I said the chances of irs questioning crazy small . If they do he screams they did something illegal . It's going to take 1-2 yrs to fight a bs 1099 .

 

[Allen Trent]

Like I said the chances of irs questioning crazy small . If they do he screams they did something illegal . It's going to take 1-2 yrs to fight a bs 1099 .

Completely agree....but remember 80,000 new IRS auditors are coming to the rescue & the self employed & businesses will be the primary focus. With 80% or more of population taking the standard deduction, those individuals don't have much to find in an audit like a business or self employed person does