1099 Errors & Corrections



Now that Forms 1099 have been filed for the year, it is time to consider any errors noted and the corrections required. There are certain errors that are never inconsequential and always require correction. Depending on the error, the correction process may require the filer to follow a one-step or two-step process that must be completed by August 1.


One-step Process


Related Errors:

  • Incorrect money amount, code, or checkbox.

  • Return filed but should not have been filed.


Process:

  • Prepare a new Form 1099.

  • Enter ‘X in the ‘Corrected’ box and date(this is an optional field) at the top of the form.

  • Correct any of the incorrect recipient information and report all other information exactly as reported in the original return.


Two-step Process


Related Errors:

  • Blank or incorrect payee TIN.

  • Incorrect payee name.

  • Filer used the incorrect type of return.


Process:


Step 1.

  • Prepare anew Form 1099.

  • Enter ‘X’ in the ‘Corrected’ box and date(this is an optional field) at the top of the form.

  • Enter the payer, recipient, and account number information exactly as it appeared on the original incorrect return; however, enter -0-(zero) for all money amounts.


Step 2. New Correct Return. Now the filer must report the correct information.

  • Prepare anew Form 1099.

  • Do not enter an “X” in the “CORRECTED” box at the top of the form. Prepare the new return as though it is an original.

  • Include all the correct information on the new correct form.

  • Provide all requested information on the new correct form.


In both processes, don't forget to prepare and file a new Form 1096 transmittal form for paper filings. For electronic filings, you may need two records as well. Certain errors, such as an incorrect taxpayer (not recipient) name or TIN number require a written letter to the IRS in order to correct the form.


If the same errors and corrections seem to reoccur each year, it may be time to conduct a holistic review of all reporting processes and procedures with the goal of updating systems and processes. Are the issues related to data? Is your reporting package picking up the correct payment and payee information? Do you have controls in place to identify errors before you submit returns? These are just a few items to consider as you continue to refine your reporting processes.


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