So you knew 1099 forms had to be processed for vendors who met the IRS guidelines and you filed them timely. Periodically, a business finds a mistake after forms are filed which needs to be corrected. What do you do if this happens to you? If you submitted 1099 forms to the IRS and later discovered a mistake, the following steps are required:
- Correct it as soon as possible and file copy A and Form 1096 with the IRS
- Furnish corrected statements to the recipients
- Complete all information required based on the type of error
Error 1: These errors only require one return to make the correction
- Incorrect payments, codes, or checkboxes
- Incorrect address
- Incorrect payee name
- Return was filed when one should not have been
For Error 1 corrections, prepare a new information return, enter an “X” in the corrected checkbox at the top of the form, and update any information needing adjustment. Remember to include all information required on forms such as name, address, tax ID and payment amount that was originally listed correctly. Process a new transmittal form 1096 including all information on the form as it applies to the correction(s) and file the 1096 with copy A of the corrected return. DO NOT include a copy of the original incorrectly filed return.
Error 2: Two separate returns are required to correct properly
- No payee Tax Identification Number (TIN) (i.e., Social Security Number, Tax ID or ITIN (Individual Taxpayer ID Number))
- Incorrect payee TIN
- Incorrect name and address
- The original return was filed using the wrong form
For Error 2 corrections, there are multiple steps. First, prepare a new information return, enter an “X” in the corrected checkbox at the top of the form, and list the payer, recipient, and account information exactly as on the original form filed, but enter zero (0) for all money amounts. Then fill out a second form, DO NOT enter an “X” in the corrected box, and enter all the correct information on the form including the correct TIN and name. Process a new transmittal form 1096 including all information on the form required, enter one of the applicable phrases (filed to correct TIN, filed to correct name, or filed to correct return), and submit 1096 with copy A of the corrected return. DO NOT include a copy of the original incorrectly filed return.
When filing corrected returns, remember not to separate copies A; submit the entire page as one sheet even if only one form was used. Do not staple or tape 1099 forms to the 1096 form, and mail to the correct processing center. To find the correct address, look on the back of the 1096 form for the state in which you are located.
