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.
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?
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.
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:
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.
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 crop up when you make any of the following missteps:
On the other hand, type 2 errors occur when you make any of the following mistakes:
Here are the steps you need to follow to file an amended Type 1 error:
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:
On some occasions, the IRS may penalize you for making 1099 mistakes. Your penalty amount may vary and depends on the following factors:
That said, the following are some of the errors that the IRS penalizes:
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:
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.
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.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?