If you made a mistake on a 1099 form that has been e-filed, you would need to file a 1099 correction. Many service providers do not offer correction filing or charge extra for filing corrections. Submitting corrections can be complicated and may result in IRS penalties if done incorrectly.
We offer a robust solution for 1099 correction processing. We not only file corrected forms with the IRS, but we also provide recipient their amended forms.
The correction process depends on the error in the original form. Based on the error on the original form, the correction processing could be different. Take a look at the common mistakes and identify the type of correction you would need to file. Following two types of error can be corrected.
Type 1 Error
If you entered an incorrect amount or used a wrong box when filing the original form, then it is a Type I error. If you sent a 1099 but should not have done so, then also it is a Type 1 error.
For this type of error, a correction form with the correct amount and box information needs to be filed. If you issued form 1099 by mistake, then you should submit le a correction form with zero amount.
Type 2 Error
If you used wrong Tax ID for the recipient or if the recipient’s company name and Tax ID do not match with those on IRS file, or if 1099 was sent to the company but should have been sent to the individual, or vice-versa, then it is a Type 2 error.
To correct this type of error, you must file two corrected forms. One form using the same Tax ID and name as on the original form with zero amount must be submitted, to void the original form. Additionally, a second form with the correct Tax ID, name, and amount must be submitted.
Errors that cannot be fixed electronically
If an error is discovered in reporting the payer (not recipient) name and/or Tax ID, the error cannot be fixed by filing a corrected form. The payer, in this case, has to write a letter to the IRS to request the changes to the Tax ID or name.
When to file corrected forms
The correction form should be submitted as soon as the error is discovered. In general, corrections to 1099 forms can be filed for returns filed within the last three calendar years. There are two exceptions to this rule:
1. Corrections to Form 1099-C, Cancellation of Debt can be filed within four calendar years.
2. Corrections to forms with Backup withholding can be filed within four calendar years.
How to avoid Type 2 errors