Attorneys have started receiving 1099s from Social Security showing attorney fees paid by Social Security. I have already received reports of income reported in box 7 instead of box 14, which is where I believe it is supposed to be reported, and of a 1099 not recording all Social Security attorney fees paid to an attorney in 2009, which will not cause problems for the attorney, but which is a bad sign anyway.
What are you seeing?
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Important Information from Social Security on Direct Payments to Representatives
Beginning in January 2010, Social Security will issue Internal Revenue Service (IRS) Forms 1099-MISC to all representatives who receive, by direct payment from SSA, aggregate fees of $600 or more in a previous calendar year for their services representing claimants before Social Security.
The majority of individual representatives that are recognized and paid directly by Social Security are affiliated with entities or firms. In these situations, the payments are usually considered taxable income to the entities or firms rather than the individual representatives. Social Security strongly encourages affiliated entities and firms to register by completing a Form SSA-1694, Request for Business Entity Taxpayer Information. This can be done online at www.socialsecurity.gov/representation or by submitting a completed paper form, by mail, fax, or in-person, to the claimant’s servicing Social Security office.
Once the Form SSA-1694 is processed, SSA will issue two Forms 1099-MISC. One will be issued to the entity or firm reporting taxable aggregate payments made to all individual representatives affiliated with the entity or firm in box 7 (non-employee compensation). The entity or firm will report these payments as gross income for income tax purposes. SSA will also issue a second Form 1099-MISC to each individual representative reporting individual aggregate payments in box 14 (gross proceeds paid to an attorney). In these situations, the amount reported in box 14 is informational and is not taxable income to the individual representative.
If the affiliated entity or firm does not register by using Form SSA-1694, Social Security will report the aggregate payments made to affiliated individual representatives in box 7 of the Form 1099-MISC issued to the individual representatives. The IRS presumption is that these amounts are taxable income to the individual representatives.
If an individual representative receives a Form 1099-MISC reflecting payment amounts in box 7 that actually are income to another person or entity, the individual representative is considered a nominee recipient. The individual representative should file a new Form 1099-MISC and Form 1096 with the IRS and provide the new Form 1099-MISC to the other person or entity that reflects the payment amounts as income. On the new Form 1099-MISC, the individual representative would be indicated as the payer and the other person or entity as the recipient. On the new Form 1096, the individual representative would be indicated as the filer. Instructions can be found in Section A - Who Must File in the General Instructions for Form 1099 at www.irs.gov. The IRS website also provides specific instructions for completion of the Form 1099-MISC and Form 1096. Social Security is not authorized to answer questions regarding taxation issues. Therefore, all questions regarding the proper completion of the Form 1099-MISC and Form 1096 must be directed to the IRS.
We received our firm 1099 yesterday and individual 1099s today. For the firm 1099s income was reported in Box 7. For the individual attorneys, fees were reported in Box 14. There were several problems with the information that I received.
1. Social Security attributed 20% of our fees to a former business entity even though we had submitted new 1695 forms for every client when the business entity changed over 2 years ago. (No fees should have been paid with the old Tax ID in 2009).
2. 25% of the fees that our firm received were not listed at all. (It appears that no dependent fees were included in the 1099s that I received).
3. There was no indication that our office returned several fees to the Social Security Administration that were overpayments. That means that although Social Security incorrectly paid us, and we fixed the problem, the fee is still included as income.
Just the initial problems that I came across. I am interested to see if everyone is experiencing the problem with under-reported fees. I was pleasantly surprised to find that we had actually received every fee that was listed.
Is Box 7 of 1099 MISC Form is going to separate form from the 2020 year?
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