What do you need to know before Filing 1099 Corrections?
Finally, the filing season is over! Some may feel relaxed, but some may have noticed errors in their 1099s. Errors are common when filing any tax forms. When it comes to 1099, the chances are high as there are many variants. But, you don’t have to worry about the mistakes in your 1099 (Be careful when filing next time). The IRS allows you to correct the mistakes you made in 1099 and can correct it easily.
Let us dive deeper into when and how you should file 1099 Corrections.
Form 1099 Corrections — Explained
The commonly used 1099s are 1099-MISC, 1099-INT, and 1099-DIV.
The IRS 1099 forms are the information returns used by the businesses to report certain payments made to someone who is not on the payroll.
Due to the arrival of the new form, 1099-NEC, filers may have a question about which form should be used, 1099-NEC or 1099-MISC, for Tax Year 2020. This may lead to selecting the wrong form and misreporting payments. To clarify, 1099-MISC should be used to report miscellaneous income, like rent and royalties. Form 1099-NEC is for reporting nonemployee compensation of $600 or more, including cash payments for fish and an attorney.
If you made errors in the 1099s that you filed, you should file a correction. However, there is no separate correction form for 1099. It is the same as the original form. You can submit corrections either by paper or online. For paper corrections, you need to fill in the correct information. Select the CORRECTED or VOID checkbox based on what you are correcting. If you correct online, you just need to select the form you want to correct, enter the correct details and transmit it to the IRS.
Comparatively, e-filing is the best choice to file corrections for quick processing, and it is mandatory to file corrections online if you have filed 250 or more 1099s. TaxBandits, an IRS-certified e-file provider, supports corrections to 1099-NEC, 1099-MISC, 1099-INT, and 1099-DIV.
Common errors in 1099s: 1099-NEC & 1099-MISC
Listed below are some of the most common errors made on 1099s.
- Incorrect Payer Name and/or TIN
- Incorrect Recipient Name and/or TIN
- Incorrect Federal and Amount Details
- Filed a return that should not be filed
Here is how you can correct each of the above-mentioned errors.
Incorrect Payer Name and/or TIN
The IRS does not expect a correction form for all errors. To correct the Payer Name & TIN, you need to send a letter to the IRS instead of a correction form. Electronic filing simplifies the process of preparing a letter for the IRS. You just have to enter the previously reported payer details and also the correct details. Then, download the letter, print, sign, and post it to the IRS.
Incorrect Recipient Name, TIN, and Amount Details
For correcting misreported Recipient Name, TIN, and Amount Details, you need to file a 1099 correction. Not every e-file provider follows the same procedure for filing corrections. If you file 1099 corrections online, you only need the corrected information. Plus, the whole filing process will only take about 5–10 minutes.
Void a 1099 form that should not have been filed
When handling multiple 1099s, you may end up filing the 1099s for someone who should not get one. To let the IRS know about the mistakenly submitted 1099, void the return.
Additional forms to be submitted with the 1099 corrections
As per the IRS guidelines, there is no specific deadline to file 1099 corrections. Make sure to file corrections as soon as you identify the errors. Don’t delay the matter further. Remember, a few errors may attract penalties.
Deadline to file 1099 corrections
As per the IRS guidelines, there is no specific deadline to file 1099 corrections. Make sure to file corrections as soon as you identify the errors. Don’t delay the matter further. Remember, a few errors may attract penalties.
IRS penalties for 1099 errors
If you file a correction that does not mean that you are free from fines, the IRS may still penalize you. You may be fined for the errors below:
- Not filing 1099s by the deadline and failure to provide a reasonable cause
- Paper filed 1099s when you were allowed only to file electronically (online)
- Not reporting the Taxpayer Identification Number (TIN)
- Reporting wrong TINs
- Not filing machine-readable paper forms
The penalty differs for each; see the updated penalty list here. Apart from errors, you may also attract penalties for the following when issuing 1099s to recipients:
- If you failed to issue the 1099 form to the recipient
- If you reported incorrect recipient information
- If you failed to include all the necessary information
Issuing Corrected 1099s
Your job does not end right after you file corrections with the IRS. You should make sure the corrected copies reach the respective recipients and state agencies through Postal Mailing or Online Access. Failure to do so may result in penalties.
That’s what you need to know about 1099 corrections! We hope you’re clear on when and how you should file 1099 corrections this year.
Watch the video below to learn how to correct your 1099 form with TaxBandits.
If you would like to correct any of the filed 1099s, you can create an account with the TaxBandits! You can file 1099 corrections even if you have filed the original return with other service providers. Moreover, you don’t need the originally reported values. The corrected information is sufficient for filing corrections. The Bulk Corrections option is also available for businesses correcting a high volume of forms. Correct your 1099s Today!
