[TX] [TX] How do I handle an inflated 1099 from my employer?

Hello. My name is Richard, and I will be assisting you. Have you reported this issue to the IRS?

I’m sorry you’re dealing with this — having a 1099 inflated against you is both frustrating and potentially expensive. Here’s how you can approach it:

1. Fix your tax return first.
   File your 2024 return with the correct income, even if your boss refuses to correct the 1099. You can submit Form 4852 (Substitute for Form 1099-MISC) along with your return, explaining that the income reported by the payer is incorrect.
   If you’ve already filed using the inflated 1099, you can amend your return using Form 1040-X once you have the accurate income figures.
2. Demand a corrected 1099.
   Send your ex-boss a written request (email or certified letter) asking for a corrected 1099 showing the true amount you earned. Keep copies of your request and any responses.
3. Report the misreporting to the IRS.
   If your boss refuses or fails to correct the form, you can let the IRS know by attaching an explanation to your return or by calling the IRS’s “Information Returns” line. The IRS may audit the payer for filing an inaccurate form.
4. Evaluate a lawsuit for damages.
   To bring a civil claim against your ex-boss, you’ll need to show:
   1. He made a false representation (the inflated 1099).
   2. You reasonably relied on it (for example, if you filed taxes based on that form).
   3. You suffered actual damages (penalties, interest, or extra tax paid).
      In most states, you’d sue for negligent misrepresentation or fraud, depending on whether he knowingly inflated the amount.
      You’ll also need to check your state’s statute of limitations (often two to three years after you discovered the error).
5. Next steps for you:
   Tell me what state you were working in when this happened — that will determine the deadline (statute of limitations) and whether you can sue in small claims court or need a higher court.
   Gather your evidence: both 1099s, any pay stubs, emails or texts showing your actual pay, and records of any penalties or interest you’ve paid.

Once you have that information, we can look at the best civil-law theory for recovery (negligent misrepresentation vs. fraud) and whether small claims court might be a good option.

In Texas, you have two principal tort-based claims available against someone who misreported your income on a Form 1099:

Negligent Misrepresentation

• Statute of limitations: Two years from the date the inaccurate 1099 was issued or when you discovered the error.
• Elements to prove:
  • Your ex-boss supplied false information (the inflated 1099).
  • He owed you a duty to communicate accurately.
  • You justifiably relied on that form in preparing your return.
  • You suffered actual damages (IRS penalties, interest, extra tax paid).

Fraud (Intentional Misrepresentation)

• Statute of limitations: Four years from the date the form was issued, regardless of when you discovered the fraud.
• To prevail, you must show:
  • He knowingly or recklessly misreported your income with intent to deceive.
  • You relied on the form.
  • You were damaged as a result.

Potential Venue: Small Claims Court
If your total out-of-pocket damages (penalties, interest, and taxes) do not exceed $20,000, you can file in your local Justice Court (small claims). Texas caps small claims at $20,000, and procedures are streamlined (no attorney required and lower filing fees).

Yes, I do believe you have the basis for a claim.

Yes, there is that possibility if you prevail.

I don’t know any attorneys in that area. I would recommend contacting your local county bar association for a referral.

You as well. Take care.