How to Correct 1099: A Guide to Fixing Tax Filing Errors

Correcting a 1099 Form involves filing a new Form 1099 using the same method you initially used. There are several reasons why you may need to do this, such as filing the incorrect amount or using the wrong form. Regardless, it’s essential to address these errors immediately to avoid further penalties.

Filing a 1099 correctly is crucial for proper tax filings, especially for businesses and self-employed individuals, so knowing how to correct this form is vital. Instead of manually preparing forms, you can use Paystub.org's 1099 form generator to streamline the process and ensure accuracy. In this article, we’ll explain the steps for correcting a 1099 form and discuss the different situations when you may need to amend the form.

Let’s start!

Key Takeaways

• Independent contractors, freelancers, and self-employed individuals will get a 1099 form once they meet the set income requirement.
• The three different types of 1099 forms are 1099-MISC for miscellaneous income, 1099-NEC for nonemployee compensation, and 1099-K for online and card payments.
• You will need to correct a 1099 form if you state the wrong amount, use the wrong income classification or form, or have discrepancies in the taxpayer or recipient information.
• The deadline for filing 1099 corrections is three years from the initial filing date.

Who Gets 1099 Forms?

Independent contractors usually get 1099 forms from their employers as a way to report the income they received during the year. For instance, if you are a gig worker, freelancer, or self-employed individual who received over $600 from a single client, you will receive a 1099-NEC form for nonemployee compensation.

That said, it’s important to report self-employment earnings even without a 1099 to avoid fines and penalties associated with underreporting income. Moreover, since 1099 forms reflect your income, you must know how to correct a 1099 form in case you receive one with errors so you can maintain accurate financial records.

Employers must issue 1099 forms for eligible employees on or before January 31st of the following year for accurate tax reporting. Failing to meet this deadline can result in a late filing penalty of $60 per return. For employees, 1099 forms are merely a record of their earnings, so they don’t have to worry about filing it.

3 Common Types of 1099 Forms

Understanding the different types of 1099 forms can help you avoid common filing errors.

Let’s see what they are:

1099-MISC

A 1099-MISC form is used to report miscellaneous income or those that come from various sources not considered regular wages, such as rent, royalties, or prizes. You need to file a 1099-MISC if you meet one of the following requirements:

• Pay an individual $10 or morein royalties or broker payments
• Pay $600 or more to a contractor for rent, prizes, cash payments, contract payments, and other services
• Pay $5,000 or more for the direct purchase of goods for resale

If you issue this form by mistake, then it’s important to file a 1099-MISC correction right away to prevent confusion and pay disputes.

1099-NEC

A 1099-NEC form is specifically used for reporting nonemployee compensation or payments made to a freelancer or contractor that meet or exceed $600.

Similar to a W-2 form, a 1099-NEC form helps the employee and the IRS monitor their total earnings for the year, allowing them to file taxes properly. The only difference between a Form 1099 vs. a Form W-2 is that the latter is for regular employees on the company’s payroll.

Stating the incorrect amount on tax documents is a form of tax evasion and can be subject to harsh fines and penalties.

Since a 1099-NEC form is an essential part of tax filing for contractors and freelancers, it’s vital that this document contains accurate information about the employee and the employer. If there are any errors in the data or amount stated on the form, make sure to file a 1099-NEC correction as soon as possible.

1099-K

A 1099-K form is used to report any payments received through third-party online platforms or payment cards, including credit, debit, and gift, that exceed $2,500.

This amount includes both single and consolidated payments, meaning even if you only received payment through an online platform once, you will still be issued a 1099-K form as long as that amount meets the $2,500 minimum requirement.

6 Common Situations Where You Might Need to Correct a 1099 Form

Before we explain how to correct a 1099 form, let’s first go over the different situations where you may need to amend 1099s, such as when filing a document with errors or using the wrong type of form. Generally, 1099 filing errors are divided into two main categories—type 1 errors and type 2 errors.

Here’s how they differ:

Type 1 Errors

Type 1 errors refer to less drastic mistakes since these would only require submitting a corrected 1099 form to be fixed.

The type 1 errors include:

• Incorrect amount. If you unintentionally report the wrong income amount, it’s crucial to correct a 1099 form right away to avoid raising any red flags for the IRS.

• Incorrect entry classification. 1099 forms have several fields where you can input your earnings, such as for rent, royalties, and other income sources. If you don’t check the form properly before filing, you may accidentally enter your earnings in the wrong classification.

• Filing an unnecessary form. If you accidentally file a 1099 form that should not have been filed, you need to submit an amended 1099 to correct the error.

Type 2 Errors

Type 2 errors, on the other hand, are more severe mistakes that require two forms: an updated 1099 form and a form with the same details as the original 1099 but with an X marking the CORRECTED box.

Type 2 errors can include:

• Incorrect taxpayer information, including wrong or missing Taxpayer Identification Number (TIN). Businesses that file a 1099 must state their complete information on the form for accurate record-keeping.

• Incorrect payee name. Since Form 1099 is a record of an individual’s earnings, it’s crucial to have their correct name and address on the form.

• Wrong form filed. Since there are three types of 1099 forms, it can sometimes be confusing which document you actually need to file. For instance, knowing the key differences between Form 1099-NEC vs. Form 1099-MISC and their uses will help you avoid this common error.

Full Guide on How to Correct a 1099 Form

To correct a 1099 form, you first need to identify the type of error made since the process for each one will be different.

Here’s how to correct a 1099 already filed based on the type of error:

How to Correct Form 1099 Type 1 Errors

The first step in the 1099 form corrections process is to prepare a new Form 1099. You can do this using Paystub.org’s 1099 form generator.

Next, you need to tick the CORRECTED checkbox on top of the new form to show that you are filing an amended document.

Then, enter all the necessary information; make sure to double-check each one to avoid having to repeat this process. Once everything looks good, you can preview your 1099 form before downloading it.

If you initially filed your 1099 form electronically, all you have to do is submit your new form to the IRS. However, if you filed a printed 1099, then you would need to mail it to the IRS along with a Form 1096.

How to Correct Form 1099 Type 2 Errors

For Type 2 1099 error correction, you need two copies of Form 1099. Once you obtain them, follow the next steps:

In the first form, check the “CORRECTED” box once again, then fill out the rest of the details exactly as you would in the first form. Next, input 0 for all the income amounts, even if your earnings meet the minimum requirement. When done, make sure to preview your file before downloading.

After that, you can generate the second form. This time, you don’t need to check the “CORRECTED” box; instead, fill out the required details with the correct information, including your total earnings. Afterward, you can download your updated 1099.

Again, if you initially filed a printed 1099 form, you must submit your amended document with a Form 1096. This time, however, you need to state the reason for correcting a 1099. This could be a simple phrase, such as “Filed to Correct Name” or “Filed to Add Missing TIN.”

Deadlines for Filing a Corrected 1099 Form

If you need to correct a 1099 form with the IRS, it’s crucial to keep track of the deadline for filing amended forms, which is three years from the date you initially filed. While this is a significant amount of time, we don’t recommend waiting more than a year to correct a 1099 form since errors in the form could also affect the contractor or vendor you worked with.

When You Should Void a 1099 Form

You should void a 1099 form if you made a mistake and have not submitted it to the IRS yet. Fortunately, it’s quite easy to fix 1099 mistakes on a form that has not yet been filed; all you have to do is tick the “VOID” checkbox next to the “CORRECTED” box on your 1099 form.

After that, simply fill out a new 1099 form and make sure to input the correct information. Make sure not to tick the “CORRECTED” checkbox on either the previous or the new 1099 form to avoid any issues.

If you need to fix a 1099, you can use Paystub.org’s 1099 generator to file accurate corrections in minutes and avoid IRS penalties.

Final Thoughts

The 1099 is an important tax form for both freelancers and self-employed individuals, as it provides them with accurate records of their total earnings for the year. Because of this, it’s crucial for businesses to process an IRS 1099 correction in case of discrepancies as soon as possible to avoid tax filing errors.

When in need of a simple and reliable way to create professional 1099 forms, consider Paystub.org’s 1099 Form generator. This online tool utilizes a standardized template to ensure that you don’t miss any important details when filling out your Form 1099.

How to Correct a 1099 FAQ

#1. Is there a penalty for correcting a 1099 form?

Yes, there is a penalty for correcting a 1099 form, and this depends on the type of error made. Generally, businesses should pay $100 per correction, but other errors like incorrect or missing TIN can lead to penalties of up to $280.

#2. Can you correct a 1099 electronically?

You can correct a 1099 electronically only if you filed the original form electronically. If you filed a printed 1099 form, then you need to correct it manually as well.

#3. Will the IRS catch a missing 1099 form?

The IRS will definitely catch a missing 1099 form, so it’s crucial to file your tax forms properly and on time to avoid any penalties or fines for late filing.