A friend of mine hired a family member as a "contractor" (1099) and it
turns out that in the even of an audit, it won't be recognized as
being valid; if
anything, it will be recognized as a gift .  The family member already
filed their taxes for the last two years.  Can the individual give the
money back for the last two years in question and she'll adjust her
return for those years and remove the deduction and hence, add it back
to her gross income?  I read that she can file IRS form 1096 and they can
resubmit their returns but we're also talking low six figure amounts
for both years.  Does the dollar amount make a difference?  Her
justification would be that the work was never completed as agreed
upon and I'm getting my money back.  Any thoughts on how my friend
should proceed with this?