As a CPA and attorney who concentrates in tax law, I receive calls from individuals from January through April who explain that they received either a W-2 or Form 1099 from someone that they either did not work for or that the form was false, malicious and erroneous.
What Should You Do?
- I politely explain that you should call the sender and explain the problem and ask that the matter be corrected.
- If the form is incorrect, a corrected information return should be provided by the sender to you.
- If the caller believes that the form was sent to you for malicious purposes and was designed to harm you, I advise you visit an attorney quickly.
- The Tax Law provides that false information returns filed by another can be addressed by you through a civil case for damages against the person or entity filing the false return.
Internal Revenue Code Section 7434 creates a private right of action against anyone who willfully files a fraudulent information return with respect to payments purported to be made to another. The statute allows for damages equal to the greater of $5,000.00 or the amount of actual damages suffered, plus court costs and, in the court’s discretion, reasonable attorneys’ fees. In these types of cases I normally try to resolve matters informally with the senders first, to give them the opportunity to correct their error, if any error exists. However, if retained I am always ready to aggressively assert the law in these matters.
Statute of Limitations
The statute of limitations for bringing suit is six years from the date the false information return was filed or the date the return could have been discovered through reasonable care, whichever is later.
Shiner v. Turnoy: an action was brought asserting that Bernard Turnoy willfully filed a fraudulent income tax Form 1099-Misc reporting that he paid income to his business partner, David Shiner, even though Shiner had never accepted such payment. Shiner’s motion for summary judgment was granted by the Court holding: If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such return.
If you believe you were sent an incorrect or erroneous and malicious W-2 or Form 1099, you should contact a qualified attorney as soon as possible.
Mark A. Krohn, LL.M Taxation, CPA and a partner at J&G, is in charge of the Business Law Team and is also a member of the Trust & Estates Team. He can be reached by phone at our Walden, NY office at 866-303-9595 toll free or 845-764-9656 and by email.