Form 8275 should be included in the 2023 ProSeries package

[Music23]

Many Schedule C filers are going to get a big surprise this January, when they receive a 1099-K from Venmo or PayPal. Many clients in this group of 1099-K recipients also will be receiving 1099-NECs from their usual contractors. Often, the contractors pay through Venmo. In light of amounts already reported on the 1099-Ks, contractors will be asked to correct their 1099-NECs. In theory, the contractors should cooperate. In reality, however, there is substantial doubt that many contractors will send corrected 1099-NECs.

Unless the standard and acceptable method of reporting discrepancies to the IRS (i.e.: the Form 8275 "Disclosure Statement") is used by the tax preparer, the client is faced with the horrible prospect of "double-reporting" income.

At the recent 2023 IRS Nationwide Tax Forum, the instructor emphasized the importance of using Form 8275 to explain the differences between amounts on a submitted 1099-NEC, and the actual amount earned through a contractor. Considering the frequency of Venmo payments in many service industries, tax preparers will have clients who work for contractors who don't want to be bothered with getting their 1099-NECs corrected. Without Form 8275 available in the Pro Series program, the tax preparer is faced with: 1) having to stop work on a return and suspending the Pro Series session; 2) going on the web to IRS forms; 3) filling out the fillable Form 8275; 4) printing a completed Form 8275; 5) scanning it; and 6) returning to Pro Series and attaching the completed 8275 to the client's return. Some tax preparers will need to repeat this process many times per client. All of this extra work outside the Pro Series program is simply unacceptable. Moreover, this scenario will be played out numerous times during the tax year, for tax preparers who have a heavy client base in certain businesses (like entertainment). 

I'm looking forward to Intuit's response.       

[TaxGuyBill]

I agree that ProSeries should have that form.

I really doubt if ProSeries will respond.

Personally, I think it that form is overused.  Even if ProSeries had it, I would not use it for the scenario that you described.

1) Form 8275 is used if you want to disclose something that is not already "adequately disclosed" on the tax return.  Methods vary, but many tax preparers report the gross amount of all 1099s, then back out as "other income" the non-correct amount.  If you do that, you can "disclose" that you are backing out income due to duplicate 1099 reporting.  In my opinion, no 8275 would be needed.

2) Form 8275 is to potentially avoid penalties due to misreporting.  But if you are reporting the correct amount of income, there wouldn't be any penalty.  So unless the client is lying to you and the 1099s are NOT duplicating income, Form 8275 wouldn't do anything.

If issuers of 1099-NECs are issuing them incorrectly, they may be subject to the penalty (up to $310 per incorrect return).  I would think that mentioning the $310 penalty to the issuers would persuade many of them to amend and file it correctly.

[carol-may]

I have often completed Form 8275 and attached electronically.  Never know if anyone actually reads it, but I reference it in the tax return if possible.