Report flags / 1099-NEC
NUMBERS“More tax withheld than was paid”
What this flag on a 1099-NEC means, why it matters, and what to check.
What it means
Box 4 (federal income tax withheld) is larger than box 1 (nonemployee compensation).
Why it matters
Withholding is taken out of the payment, so it can't exceed it. A payer's software never prints this.
Ordinary explanations
- None in a real form; a misread box is the usual innocent cause, so compare with the original.
What to check
Ask the applicant for the IRS wage and income transcript (free at irs.gov or with Form 4506-T), which lists W-2 amounts as the employer reported them.
A flag is a reason to verify with the source, not proof. Apply the same steps to every applicant.
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