In this age of many tax forms, it is not a surprise that some tax forms are not correct, they are issued in error.
That is why if you get a tax form that looks like it might not be correct, you need to contact the firm or person that issued it. If it is wrong, they can do a “corrected” form. They will send the “corrected” form to IRS and give you a copy.
Form 1099-MISC is used for many purposes, but mainly to report payments to you that are income. If you are an independent contractor, it is important to check and be sure the amount is correct.
The Tax Court in 2017 looked into the facts of the matter and found the form was wrong in the case of Floetta Bullock. She intended to only be a cosigner on a loan to her son so he could buy a truck for his business in 2007. The Credit Union that made the loan knew she was to be a cosigner. The son made all the monthly payments on the loan. However, Floetta unwittingly signed paperwork that indicated she was the primary borrower. (Let’s all read very carefully what we are asked to sign).
About a year later, in 2008, the truck was stolen. The insurance was only enough to pay part of the balance owed to the Credit Union. The son stopped making the monthly payments after the insurance company paid the insurance proceeds to the Credit Union. The unpaid balance of about $8,100 remained unpaid until in 2013, the Credit Union sent Floetta a form 1099-C showing she had cancellation of debt income.
The paperwork indicated her name first, so she was on the computer records as the borrower.
The Tax Court looked into the details and found Floetta was not the debtor, was not taxable on the cancellation of debt. It was clear Floetta did not intend to be the primary person on the loan. The dealership that sold the truck knew she was just helping her son and she did not intend to repay the loan. The Court also found the Credit Union knew she was only a cosigner-her son was the primary borrower. It was aware that her son was responsible for the loan payments. The Court found there was no bona fide obligation between her and the credit union. She was only a guarantor on the loan. (The son should have been the recipient of the form 1099-C, not Floetta).
One of our family sayings is “if Moses had not made a noise in the bulrushes, where would he be?” If it looks like the form could be wrong, “make a noise” and find out if the tax form is not correct. We all make mistakes and the “corrected” form is not hard to do.
Did you hear “Who would please everybody must rise early.” French Proverb