Identification Number:
EM-21006
Intended Audience:All RCs/ARCMOS/ADs/FOs/TSCs/SPIKES/PSCs/OCO/OTS/OCO-CSTs
Originating Office:DCO OPSOS
Title:IRS 1099-MISC and IRS 1099-NEC Inquiries and Corrections
Type:EM - Emergency Messages
Program:All Programs
Link To Reference:
 
Retention Date: August 30, 2021

A. Purpose

This EM provides guidance on recent changes to IRS Form 1099-MISC, the introduction of IRS Form 1099-NEC, how to handle 1099-MISC and 1099-NEC inquiries from appointed representatives, when and how to correct erroneous 1099s, and where to find relevant information.

B. Background

The Internal Revenue Service (IRS) requires us to report when we directly pay an appointed representative aggregate fees of $600 or more in a calendar year. In years prior to 2021, we used the 1099-MISC to report these fees for all representatives. Beginning in 2021, we will report representative fees on either the 1099-MISC or 1099-NEC, depending on a representative’s affiliation status.

In order to receive direct payment of fees, a representative must register with us using the Form SSA-1699 (Registration for Appointed Representative Services and Direct Payment) and request direct payment on the Form SSA-1696 (Claimant’s Appointment of a Representative) or other written appointment.

Law firms and other business entities that employ representatives can register with us using the Form SSA-1694 (Request for Business Entity Taxpayer Information); representatives can affiliate themselves with registered entities for tax-reporting purposes. A registered entity will receive an annual informational 1099-NEC reporting only the fees we directly paid to appointed representatives in their capacity as affiliates of that entity.

C. Changes to fee reporting on 1099 forms

1. Self-employed and unaffiliated representatives

      Some representatives are self-employed (sole proprietor/sole practitioner) and use Taxpayer Identification Numbers (TINs) or their own Social Security numbers (SSNs) to report their income. The IRS now requires us to report fees we directly pay these representatives on a new form, the 1099-NEC. We will report these earnings in box 1 (Non-employee compensation). These amounts are reported to the IRS as income. We also use the 1099-NEC to report fees we directly pay to representatives who work for entities that are not registered with us, or who were not affiliated with a registered entity during the tax year in question.

      NOTE: We previously reported these earnings in box 7 of the old IRS 1099-MISC.

2. Affiliated representatives
      Other representatives are employed by a registered entity or firm and perform representational services on behalf of their employer while receiving a salary. For these representatives, we use the representative’s SSN and the entity’s EIN to associate (“affiliate”) them with each other. We will report fees we pay these representatives directly in box 10 (Gross proceeds paid to an attorney, previously box 14) on the revised 1099-MISC. These earnings are not reported as income. In order to affiliate a representative with an entity, the representative must have registered with us using the Form SSA-1699, and timely filed a Form SSA-1696 (or other written appointment) for each instance of representation, providing affiliation information including the entity’s EIN. Affiliated representatives can use the 1099-MISC to reconcile the amounts with their employers without having to pay taxes on income they did not receive. We do not allow claimants to appoint entities, nor do we issue direct payments to entities.
D. Corrections to 1099 forms

We will not correct errors on a 1099-MISC or 1099-NEC if the representative shows no proof of the error; the error was due to a representative’s failure to register his or her employer; or the representative failed to update affiliations and other information timely. Representatives are responsible for updating their personal information and affiliations.

NOTE: SSA does not provide tax advice. Technicians should not attempt to reconcile fees or answer tax questions.

1. When we will not correct a 1099


    We will not correct a 1099-MISC or 1099-NEC when a representative:

    · Worked for an entity that was never registered (via an SSA-1694), thus the entity never received a copy of the 1099;

    · Did not inform us about an affiliation timely and we reported the earnings as the representative’s own income on the 1099;

    · Did not update his or her affiliation after he or she earned the income and we issued the payment; or

    · Returned a fee but has no proof of the remittance, or we issued the fee in question prior to the tax year being reported.

    NOTE: If any of the above apply, advise the representative that he or she must discuss the issue with the IRS, his or her employer, or both.


2. When we will correct an erroneous 1099

    We will correct an erroneous 1099-MISC or 1099-NEC in the following situations:

    · Name or address changes;

    · Improper posting of remittance/returned check;

    · Erroneous fees (never paid/wrong amount); or

    · Remittances of payments made the same calendar year, but not properly posted.

    NOTE: We do not correct a 1099 to reflect remittances of payments made prior to the tax year reported, or errors that occurred due to incorrect affiliations. In such instances, the representative must contact the IRS or his or her employer to initiate corrections.


E. Procedure to reissue or correct a 1099

1. Replacement of lost/not received 1099
      · Access the Payments Outside Title II System (POTS) menu by selecting number 27 from the PCOM main menu.

      · On the POTS menu, select number 6, ATTORNEY 1099 MAIN MENU.

      · Enter the supplied SSN or EIN, Tax Year for the form, and select 1, MAIL REPLACEMENT 1099/SUMMARY.

      · Often the reason a representative did not receive the original mail is because the address in our records is outdated. Ask the appointed representative where to mail the Form 1099. Verify this address with the address shown in the bottom portion of the screen. If the address is correct, reissue the Form 1099.

      · Enter “Y” in REISSUE/MAIL 2009 IRS 1099/WORKSHEET (Y/N). Inform the representative that he or she will receive a replacement in about two weeks.

      · If the current POTS address is incorrect, make a correction in the Registration, Appointment and Services for Representatives (RASR) system. Inform the appointed representative that he or she must submit an updated SSA-1699 (Request for Appointed Representatives Direct Payment Information) to correct the address.

      · Representatives can obtain information and instructions on how to register and keep their information up-to-date online by accessing Registration Requirements for Representatives to Receive Direct Payment of Approved Fees and Forms 1099-MISC or through www.SocialSecurity.gov/representation. If a representative, who is eligible and would like to receive direct payment is not registered, inform the representative that he or she must complete a paper SSA-1699 and fax it to us at 1-877-268-3827.

      NOTE: Inform a representative who wants to change affiliations with a registered entity that he or she must submit a separate SSA-1696 Section 5 (or equivalent writing) for each pending case to ensure that we will issue the 1099 to the correct affiliate.

    2. Correction of an erroneous 1099
        To correct a 1099, use the POTS 1099 CORRECTION MENU as follows (see SM 00837.035):
            a. For addition of a remittance or returned check, select 1, 2, or 3. For complete information, see SM 00837.040.
            b. For removal of a remittance or returned check, select 4, 5, or 6. For complete information, see
            SM 00837.045.

    3. Useful numbers and links
    Direct all program-related and technical questions to your RO support staff or PSC OA staff. RO support staff or PSC OA staff may refer questions or problems to their Central Office contacts.

    References
    SM 00837.000 Attorney Fee 1099 Process Table of Contents
    GN 03913.000 Individual Registration for Appointed Representative Services and Direct Payment of Fees Table of Contents



    EM-21006 - IRS 1099-MISC and IRS 1099-NEC Inquiries and Corrections - 02/04/2021