Last year my employer issued a 1099 with my earnings in box 7. This year the earnings are in box 3. Nothing has changed in the service I provide or the wages I earn. I provide educational instruction for after-school programs. I can't figure out if they made a mistake this year or last. And what it means for me in terms of being audited or getting a corrected form. If I file based on what they sent me and it is incorrect, would it be my fault or the employers, who would get a penalty in the case of an audit?

asked 06 Apr '11, 14:25

Emily's gravatar image

accept rate: 0%

Hi Emily... Are you an employee or an independent contractor? Please see below.

(07 Apr '11, 06:16) Kristy M. W.

Hi Emily,

If you are an independent contractor, I concur with Brent on how to handle this discrepancy on your return; HOWEVER, you are specifically using the term “my employer” rather than client. This discrepancy is very relevant and should not be overlooked.

Employees typically do NOT receive a Form 1099-MISC, but rather a Form W-2. Further, employees report wages earned on line 7 of Form 1040, and independent contractors report gross receipts on Schedule C (Profit and Loss from Business).

IF you are actually an employee, you have a problem greater than the trivial issue of box 7 versus box 3. As luck would have it, we’ve tackled the subject of employee versus independent contractor in this forum before. Do see the comments under the following post:

Best of Luck!


answered 07 Apr '11, 06:15

Kristy%20M.%20W.'s gravatar image

Kristy M. W.
accept rate: 4%

Excellent point!

(07 Apr '11, 14:14) Brent Berkman

I'm with Kristy on this one. You say "my employer" then you say "1099-MISC" and the two are usually mutually exclusive.

(07 Apr '11, 21:31) EAgent

Thanks for replying. After reading some of the other forum posts, I do think I am an independent contractor, not an employee.

(08 Apr '11, 14:27) Emily

It is their mistake so I wouldn't worry about it. As long as you report it as income on your return you shouldn't be audited.


answered 06 Apr '11, 15:54

Terry%20W.'s gravatar image

Terry W.
accept rate: 0%

Box 3 is for income that is not reportable in one of the other boxes on the form, such as prizes and awards that are not for services performed. It also includes merchandise won on game shows and sweepstakes winnings not involving a wager.

It would not hurt to notify the payor that the 1099 was incorrectly prepared and afford them the opportunity to correct it. You should also file Form 8275 (Disclosure Statement) attached to your return in order to explain the discrepancy.


answered 06 Apr '11, 16:33

Brent%20Berkman's gravatar image

Brent Berkman
accept rate: 13%

So, I should fill out a Schedule C (as if the income were correctly reported in box 7) and a Form 8275?

I have brought this to the attention of the organization that paid me, but they either didn't understand my concern or didn't believe it was wrong. They were pretty dismissive.

(08 Apr '11, 14:31) Emily

Yes, Complete Schedule C as usual and explain the discrepancy on Form 8275 as well as the Company's refusal and failure to correct the issue.

(17 Apr '11, 03:34) Brent Berkman
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Asked: 06 Apr '11, 14:25

Seen: 6,470 times

Last updated: 07 Apr '11, 06:15