How to File a Corrected 1099 Step by Step
Master the process of correcting 1099 tax forms. This guide covers identifying issues, preparing accurate revisions, and ensuring proper submission for compliance.
Information returns, commonly known as Form 1099, document various types of income received outside of traditional wages, salaries, and tips, such as nonemployee compensation, interest, dividends, and rental income. Issuing accurate 1099s is important for businesses and individuals, as these documents provide essential information for both the Internal Revenue Service (IRS) and the income recipient. Errors can occur during preparation or filing, requiring a correction to ensure proper tax reporting and maintain compliance with IRS regulations for both the payer and the recipient.
Understanding When and Why to Correct a 1099
Correcting a Form 1099 is necessary when an error is identified after the original form has been filed with the IRS or furnished to the recipient. Common reasons for correction include errors in the recipient’s information, such as an incorrect name or Taxpayer Identification Number (TIN). An inaccurate TIN can lead to notices and potential penalties from the IRS for both parties.
Mistakes in reported monetary amounts, including income figures or federal income tax withheld, also necessitate a corrected form. For example, if the amount paid to an independent contractor was overstated or understated, a correction ensures the recipient reports the correct income. Using the wrong type of 1099 form, such as a Form 1099-MISC instead of a Form 1099-NEC for nonemployee compensation, also requires correction.
Issuing duplicate forms or filing a form when one was not required also calls for corrective action. Promptly addressing these inaccuracies helps recipients accurately file their tax returns and allows payers to avoid potential penalties for incorrect or late filings.
Preparing Corrected Forms
Preparing corrected Form 1099s involves specific steps depending on the type of error. For most corrections, a new Form 1099 must be prepared with the “CORRECTED” box marked at the top. This indicates to the IRS that the form is an amended version of a previously filed document and should include all accurate information for the reporting period.
Correcting Monetary Amounts
When correcting an incorrect monetary amount, a new Form 1099 is used. The “CORRECTED” box is marked, and the correct monetary figure is entered into the relevant box. All other information, such as the recipient’s name and address, should be identical to the original submission unless those details also require correction. This new form replaces the erroneous financial data initially reported.
Correcting Recipient Information
Correcting an incorrect recipient name or Taxpayer Identification Number (TIN) follows a two-step process. First, a new Form 1099 is prepared with the “CORRECTED” box marked, and the original, incorrect recipient information is entered along with “0” (zero) for all money amounts. This voids the previously submitted form. Second, a separate, new Form 1099 is prepared with all the correct recipient and monetary information, but the “CORRECTED” box is not marked on this second form. This two-part approach ensures the original incorrect record is nullified and a new, accurate record is established.
Voiding an Erroneous Form
If a Form 1099 was issued in error and should not have been filed at all, the original form needs to be voided. To void a form, an “X” is placed in the “VOID” box on the original incorrect copy. If a correct form is still necessary after voiding the erroneous one, a new, accurate Form 1099 must then be prepared and submitted.
When filing corrected paper Forms 1099 with the IRS, Form 1096 must accompany them. On Form 1096, the “CORRECTED” box must also be marked. A separate Form 1096 is required for each different type of Form 1099 being submitted (e.g., one for 1099-NEC and another for 1099-MISC).
Submitting Corrected Forms
Once corrected Forms 1099 are prepared, they must be submitted to the IRS.
Paper Filing
For paper filings, corrected forms are mailed to specific IRS addresses. These addresses vary by form type and the state from which the filing originates. Always consult the current IRS instructions for the specific Form 1099 to determine the correct mailing address for Copy A.
Electronic Filing
Electronic filing is also an option. For the 2024 tax year and subsequent years, businesses filing 10 or more information returns are generally required to file electronically. This threshold applies across various information returns, including the 1099 series. Electronic corrections are typically submitted through the IRS’s Filing Information Returns Electronically (FIRE) system. Many tax software providers and IRS-approved e-file services facilitate this process.
Deadlines and Processing
Deadlines for submitting corrected Forms 1099 generally follow the original filing deadlines. The IRS prefers corrections for previously filed returns be submitted within three calendar years. While the IRS may accept corrections beyond this period, timely submission helps ensure consistency with recipient records and minimizes potential issues. After submission, immediate confirmation of receipt is typically not provided by the IRS, and processing times can vary.
Post-Submission Considerations
After corrected Forms 1099 have been submitted to the IRS, notify the recipient of the correction. Provide a copy of the corrected 1099 form to the recipient as soon as possible. This ensures they have accurate information to prepare or amend their own tax returns, preventing potential discrepancies with IRS records.
Maintaining thorough records is also a prudent practice. Retain copies of the original 1099, the corrected 1099, and any related transmittal forms or correspondence. These records should be kept for a minimum of three years from the date the return was filed or the tax was paid. This documentation serves as proof of compliance in case of future inquiries or audits.
Making corrections promptly is important for both the payer and the recipient. Timely adjustments help ensure both parties meet their tax obligations and avoid potential penalties associated with incorrect information reporting. Taking immediate action upon discovering an error helps maintain accuracy in the tax reporting system.