I've been having an issue for quite some time now, and to be honest, I don't really understand what has happened.

I was out of the country until October of 2005 (I had no U.S. taxable income when I was outside the country), and for my taxes that year I reported the only income I had - which was the W-2 I received from the job I got when I returned.

About a year and a half later I received a notice from the IRS saying that I had underreported income. After talking to the IRS, it seems there was a 1099-misc sent to my name (at my parent's address) with $7600 of income. Of course, I didn't report this because I had absolutely no knowledge of it and it was not my income.

I have talked to my Father, because I received the 1099 from where he worked. I don't really understand what was going on, but he admitted it was a mistake and when he tried talking to the company they wouldn't amend it or something... I have a feeling it was actually my Father's income and that he just put my SSN and name for the receipt of the 1099? I'm not sure if that was the case, or if it was simply an error.

Either way, my Father gave me a Schedule C with a 1040x to file to the IRS for 2005. On this schedule C includes that 1099 income that I hadn't reported (because I had no knowledge of it and I NEVER received it), and expenses to offset the income, so there was no net change in my tax liability. However, now I'm a little uncomfortable with the "what-if" the IRS audits that schedule C. I asked my Dad, and he said he has documentation for those expenses...

But I'm wondering, if the IRS saw that I didn't report that income, would they accept the fact that I'm now reporting expenses? I mean... if someone had schedule C expenses, wouldn't they expect the person to remember that they had schedule C income?

That's my story and my dillemma. My question is this... is there an easier way then actually claiming this income that I NEVER RECEIVED? Can I dispute the 1099 saying it was incorrect and not ever have to file an amended return? Can I just put it on the company or on my Dad to resolve it? I'm sick of trying to figure this out.

I fully understand your situation. Since, the option of asking Dad's company that reported the 1099-Misc is not available, I would have written to the IRS and told them that the 1099-Misc was incorrectly reported on your SSN and instead should have been reported to Dad's tax return.

By the way, how much was the amount reported on the 1099-Misc?

A letter from Dad to the IRS attesting to this fact would also have been helpful. However, the IRS would then want to know how this error occurred! Your Dad probably provided your SSN to the employer so as to report the income on your tax return!! I think this could have created some problems for your Dad, in my opinion.

The approach that your Dad has taken, whilst from a tax liability it has not impacted your tax return, it is technically wrong. To file another amended tax return is very problematic, however, if your are still unconvinced, this would be the time to visit your local CPA and get his written opinion as to how best to proceed for you.

For the future, I think the best approach would be to tell your Dad, that you are uncomfortable with reporting any income on your tax return so as to avoid this problem for both of you in the future. Your Dad's employer should get the SSN corrected immediately and this should solve the future problem.

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Ask TaxGuru Please refer to the legal disclaimer.

I contacted the IRS and it seems they never received that amended 1040 (with the schedule C and all the expenses that I was uncomfortable with)... Call it luck or whatever, but I am glad that is the case.

I was recommended by my boss (who is a CPA) to do an amended return claiming the full $7,696 on my schedule C, and then having one "other expense" of $7,696 with a description saying that this was NOT my income, but rather my Dad's, and putting my father's social security number in the note so he can deal with the problem.

Does this seem like a reasonable solution? Should I attach a letter with an explanation to my tax return, or will a few simple lines suffice?

I think that is only approach to make and probably a smart move, but, I would wait a few weeks to make sure that the amended tax return was not received by the IRS.

Amended tax returns tend to take a little while to process, so I suggest that you wait for a few more weeks before you go ahead with a plan to file the amended tax return as advised by your CPA friend.

Good Luck!

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I received an overpayment from my employer; when the error was discovered I agreed to return the money in several installament through out this year. I am concerned that my 1099 reflects the total ammount received. How will I justify the money that has to be returned.

I asked the companies accountant to correct 1099 and he said you'll have to ck with your personal accountant.
How to handle this.