1099 amendment: how to correct information returns

So you’ve realized you’ve made a mistake on a 1099 form that you’ve already filed. Maybe you’ve put the wrong TIN; maybe you’ve accidentally entered the wrong amount; maybe you’ve confused addresses. Whatever the reason is, you don’t need to fret. You can submit a 1099 amendment or corrected form to the IRS.

In this guide, you’ll learn how to amend a 1099 form if you’ve messed up, and how to remain tax-compliant.

What You Should Know About Form 1099

Although 1099s have several variations, we’ll look at the Form 1099-NEC and Form 1099-MISC in this article.

Form 1099-MISC is an IRS tax form that helps in reporting miscellaneous income that includes rent, legal payments, health fees, royalties, among others.

Form 1099-NEC, on the other hand, is used to report nonemployee compensation. Previously, nonemployee compensation belonged in Form 1099-MISC, but that has since changed. The IRS now requires businesses to report any payments of at least $600 to nonemployees, such as independent contractors or freelancers, on the new Form 1099-NEC. Non-employee compensation can include commissions, fees, prizes, and awards.

That said, how do you correct a mistake on a Form 1099-MISC or Form 1099-NEC that you’ve already sent to the IRS?

How To Amend a 1099 Form That You’ve Already Filed

Correcting 1099 mistakes isn’t as difficult as you might imagine. You just need to fill out a new, corrected form and mail it out to the IRS, and ensure you mark the “corrected” box that’s at the top of your 1099. This allows the IRS to differentiate your new form from others that are either voided or filed for the first time. Also remember to avoid sending the original copy.

Note that you also need to include a new form 1096 along with the amended return. Form 1096 is a reconciliation sheet that outlines the information from all the 1099 forms you send to the IRS.

Form 1096 needs to accompany each batch of 1099 forms submitted. However, if you’re filing your returns electronically, you don’t need to include the transmittal form.

What if You Incorrectly Put Your Name or TIN?

With some errors, you don’t need to file a corrected 1099 form. When you make a simple mistake -- such as entering your name or TIN (or both) incorrectly -- you only need to send a letter to the IRS, and it needs to include the following:

• Your name
• Your address
• Your TIN
• The tax year
• Type of error
• Recipient of payment
• Your filing method
• Transmitter Control Code
• Type of return
• If income tax was withheld

Regardless of whether you filed your returns electronically or manually, you can still mail a letter to the IRS to correct your name or TIN.

Types of Errors in 1099 Forms

According to the IRS, there are two types of errors you can make when filing 1099s: Type 1 and Type 2.

With the former -- Type 1-- you only need to send one corrected 1099 form to fix your mistake. However, with Type 2 errors, you need to file two 1099s to make your correction.

We’ll explain the process you need to follow to correct both types of errors in the next section.

But first, what’s the difference between the two errors?

Type 1 Errors

Type 1 errors crop up when you make any of the following missteps:

• Recording an incorrect payee name
• Reporting an incorrect payee address
• Filing a form when you shouldn’t have filed it
• Entering an incorrect amount
• Putting a wrong code or checkbox

Type 2 Errors

On the other hand, type 2 errors occur when you make any of the following mistakes:

• When you file the wrong tax forms (Form 1099-MISC instead of file Form 1099-NEC)
• Reporting an invalid address
• Filing a form with a missing or incorrect taxpayer identification number

How To Correct Type 1 and Type 2 Errors

Here are the steps you need to follow to file an amended Type 1 error:

• Obtain another 1099 form from the IRS
• Get another 1096 from the IRS. Use one Form 1096 for each 1099 you’re correcting
• Mark an X in the “corrected” box of your 1099 form
• Enter the correct information (code, checkbox, amount)
• Input the other information in your new 1099 form exactly as you reported it initially
• Complete the 1096 with the updated information
• Mail the corrected 1099 and Form 1096 to the IRS and required state departments
• Mail the corrected 1099 form to your independent contractor or freelancer

Fixing type 2 errors is slightly different; you’ll need to first identify the incorrect return you submitted then report the correct information. Here’s what you need to do:

Step 1:

• Obtain another 1099 from the IRS
• Mark an X in the “corrected” box
• Input the account number, recipient, and payer exactly as you had reported originally
• Input “0” for all money amounts

Step 2:

• Prepare an updated information return
• Don’t mark an X in the “corrected” box
• Enter all the correct information
• Obtain a new 1096 from the IRS
• Enter the correct information in he 1096
• At the top of Form 1096, include any of these phrases: “filed to correct return,” “filed to correct SSN,” or “filed to correct name”
• Mail the corrected 1099 form to your independent contractor or freelancer
• Mail the corrected 1099 form and 1096 form to the IRS or required state department

Does the IRS Penalize A Corrected Form or 1099 Errors?

On some occasions, the IRS may penalize you for making 1099 mistakes. Your penalty amount may vary and depends on the following factors:

• What's the size of your business? (larger businesses often incur harsher penalties)
• What kind of mistake have you made?
• Late filing penalty: How late were you when you filed your 1099? (You’ll face a higher penalty for not filing a 1099)

That said, the following are some of the errors that the IRS penalizes:

• Filing manually or on paper when you're required to file electronically or e-file
• Failing to report a Taxpayer ID
• Reporting the wrong Taxpayer ID
• Filing after the due date
• Filing a paper that’s not machine-readable
• Failing to send a 1099 to your independent contractor
• If you don’t reveal all the relevant information about you as a payer

How To Nullify a 1099

So far, we’ve explained how you can correct an error after you’ve submitted your form to the IRS. But what if you haven’t sent it yet?

Let’s say you’re filing a 1099 sheet that contains several 1099 tax forms. Each 1099 form reports the income of separate independent contractors.

If you realize you’ve made a mistake with one of the forms, then you may have to void it. Voiding allows you to cancel out a form on a 1099 sheet, saving you from the hassle of redoing everything.

You also need to know that you can’t detach a form from a 1099 sheet. The IRS doesn’t accept any detached forms for processing. So, if you discover a mistake when typing your 1099 data, then your only suitable option is to void the form.

Here’s the process on how to void a 1099:

1. Enter an X in the ‘void’ box in your 1099.
2. Input the correct information for the 1099 you’ve voided. If the voided form belongs to an independent contractor who needs a 1099, then enter the accurate information on the next blank 1099 on your sheet.
3. Prepare Form 1096
4. Send both the voided and corrected 1099s (plus Form 1096) to the IRS or required state department

Note that if your business files less than 250 forms a year, then you may submit paper 1099s to the IRS. But if your business files over 250 forms a year, then you need to e-file.

When You Make Too Many Mistakes

Sometimes you may mess up, and you don't have any solutions to your problem. Instead of trying to bail yourself out of the situation, you can get some help from the IRS.

Get in touch with the IRS customer service by dialing (800) 455-7438.