How to Void a 1099 - An Easy Guide for Taxpayers

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Taxes

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Tom Smery

Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

When filing taxes, very few people know how to void a 1099 - mainly because they do not think that they will ever need it. However, errors can happen sometimes.

It can be the name and address, or it may be that you messed up the sum written on the form. In that case, voiding the original form is the best thing you could probably do to avoid a penalty. This article will guide you into what you should do if you make a mistake with form 1099.

Common Errors that Need Correcting

If the mistake is small or does not involve a smaller amount of money, then it is likely that the error will not need correcting. However, there are still some common errors that, when left uncorrected, can still cause a fair deal of trouble.

Here are some of the most common errors that people make when they e-file their forms.

They used the incorrect 1099 form (for example, they used the 1099-MISC form when the law required them to use the new form, 1099-NEC).
They marked the wrong code or checkbox
They added the incorrect money amount
They e-filed a return in circumstances where they should not have
They added the incorrect payee name or social security number on the forms

Bear in mind that there are other errors that people may make when they e-file their forms. One example would be failing to file by the end of the tax year. In these circumstances, you will not have to file any corrected 1099 forms, but you will be penalized for every day that passed.

Types of Mistakes on Form 1099

There are two types of errors that you can make when filing these forms:

Type 1 Mistakes

Type one errors appear when you file with the wrong amount, code or checkbox, name of the payee, address, or when you file in the wrong form. In this case, you will only need a single form 1099 to the IRS to state your correction.

Type 2 Mistakes

These errors occur when the forms contain the wrong information of the payer, recipient (TIN included), or you filed the wrong forms (i.e., form 1099-INT instead of Form 1099-DIV). Two forms 1099 will be required to correct this mistake - one to the IRS, and one to the recipient.

How to Prevent Common Errors

Precaution is key, so whether you are filing a W-2 or 1099, these are a few points that you should remember:

Do not insert "none" or "0" in the boxes. If certain boxes don't apply to your trade or business, simply leave them alone
Don't add the dollar sign in the boxes where you need to add the sum
Don't skip the decimal points, whether you are dealing with 1099 forms or the W-2
Don't use small fonts for entries. The preferred option is Courier, 12-pt.
Don't use form 1099-NEC in order to report the wages of the employees. That's what form W-2 is for.

If mistakes do happen and you are not sure how to correct them, the best thing to do is to contact the IRS. They will give you the advice you need.

How Do I Void a 1099 Form with the IRS?

You may void a 1099 Form with the IRS if the form was delivered, but the IRS did not get it yet. In that case, you can void it before it gets sent to the IRS. Here are the steps you'll want to follow:

Mark the "Void" Box

When form 1099 is e-filed, your sheet is not detached from the page - and until it gets to the IRS, you will still have access to it. If you find a mistake on your form, rather than detaching the sheet, you need to hit "void" on it instead. The IRS does not accept detached sheets for processing.

Report Corrected Information

Report the corrected information for the form 1099 that you marked "void." If there were other files attached to the sheet, report them there as well.

File Form 1096

Download form 1096 from the IRS and prepare it to summarize the information. This form is a reconciliation sheet, and it contains the data for every form 1099 that you submit. Obviously, if you submit a corrected form 1099, you will have to submit a new form 1096 as well.

Submit Both Voided and Correct Forms

Together with form 1096, send both 1099 forms to the IRS: the original form and the correction form. The IRS will then update the information.

How Do I Correct a 1099 Form?

If the 1099-MISC is already sent, then you will want to correct rather than void it, using the "corrected" box. Here are the steps required for this process:

File in a new, corrected form 1099, separate from the one that you originally sent to the IRS
Hit the "Corrected" box. You can see it at the top of the form.
Send the corrected form 1099 to the IRS, along with a new 1096 form (the latter requiring no correction).

You also need to send the corrected form to the recipient that is also affected by this modification (i.e., the contractor). A new W-2 may also be required.

How Do I Void a 1099-DIV?

A 1099-DIV is voided pretty much in the same manner as a 1099-MISC. File the new form with the correct information (correct code or checkbox, amount, code, name, or address).

Check "Void," send it to the recipient, and then send another one to the IRS. If you are filing using paper, then you need to do so together with form 1096.

How Do I Correct a 1099-NEC?

How to file form 1099-NEC corrections are simple. It's the same way for other 1099 forms. Regardless of the type of form that you filed (electronic or paper), the correction will be done by paper.

In that case, you will need a Red Copy A along with form 1096, filing it then to the IRS. The other parties involved (i.e., your contractor) will also need to receive an updated version of the form 1099-NEC.

What If I File the Wrong Name or TIN?

In case you put the wrong name or TIN (taxpayer identification number) on the forms, there is no need for you to file a corrected version. This applies whether you file with electronic or paper forms.

If this happens, you need to write a letter to the IRS, where you include the following information:

Your address and your name
The tax year
The error type
Taxpayer identification number (TIN)
Return type
Transmitter Control Code
Filing method
Payees number
Whether there was withholding of federal tax income or not

You will need to send the letter with the correction to the Internal Revenue Service. From that point, they will make the correction to the forms that you filed.

The Bottom Line

Mistakes can happen but they can also be fixed. In most cases, it's as easy as checking off a box and adding the right information. That being said, if you are still not certain what to do, you may want to contact the IRS or your tax advisor.

What Defines a Verbal Contract?

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.

When is a Verbal Agreement Legally Binding?

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:

Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.

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.

How strong is a verbal agreement 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.

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When are verbal agreements not enforceable?

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:

The sale of real estate or vehicles
Real estate leases lasting longer than one year.
Property transfer following the death of the owner.
The case of a party agreeing to pay debt for someone else.
Any contract that requires more than a year to fulfil.
A contract involving and exceeding a specified amount of money (which varies by state).

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.

How are Verbal Contracts Enforced?

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?

How can you prove an oral contract?

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.

Written vs Verbal Contracts: What's the Verdict?

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.

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Say hello to digital contracts

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.

Benefits of written contracts

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.

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