After the end of each year, small business owners must prepare 1099 forms to report payments to non-employees and others. If you make a mistake on a 1099 form, it’s important to get it corrected for both the Internal Revenue Service (IRS) and the payee.
This article gives an overview of 1099 forms and the process for correcting them and reporting the corrected payments.
- Small businesses must submit different types of 1099 forms each year to report payments and taxpayer identification numbers.
- Two common types of 1099 forms are 1099-NEC to report payments to non-employees, and 1099-MISC to report payments for rents, royalties, and other miscellaneous payments.
- The worst error on a 1099 form is a missing or incorrect taxpayer identification number.
- If you filed 1099 forms electronically, you must correct them electronically.
- You can mail corrections on paper forms if you originally filed them by mail.
When Do Businesses Issue a Form 1099?
Small businesses issue several types of 1099 forms to report taxable payments to various businesses and individuals. The most common types of 1099 reports are:
- Form 1099-NEC for non-employees
- Form 1099-MISC for miscellaneous types of payments
- Form 1099-DIV for report dividends and other distributions to shareholders
- Form 1099-INT for interest payments
- Form 1099-R for distributions from retirement plans, profit-sharing plans, pension plans, and more
The IRS calls 1099 forms and similar forms “information returns.” Some requirements are common to all these forms, while other requirements differ based on the form. Forms 1099-NEC and 1099-MISC are the most common forms for small businesses.
Form 1099-NEC is used to report payments to non-employees who provide services to the business. These individuals include freelancers, gig workers, independent contractors, attorneys, and other professionals.
Form 1099-MISC reports several different types of payments, including royalties, rents, prizes, awards, and other income payments.
Where Do You Send 1099 Forms?
Each 1099 form has several copies:
- Copy A for the IRS
- Copy 1 for state tax agency (if the state requires income tax)
- Copy B for the recipient (payee)
- Copy 2 for the recipient, for their state income tax return
- Copy C for the payer (your small business)
The due dates are different for payees and the IRS depending on the form. Each due date is for either January or February of the year following the tax year.
Due dates may change in a year when the due date is a weekend or holiday. In this case, the due date is the next business day.
Deadlines for Forms 1099-MISC and 1099-NEC
Here are some important deadlines to remember for 1099-MISC and 1099-NEC forms:
- Copy A of form 1099-MISC is due to the IRS on Feb. 28, or Mar. 31 if filed electronically, and due to payees by Jan. 31.
- Form 1099-NEC is due to the IRS and to payees by Jan. 31.
If you are mailing 1099 forms to the IRS, you must include a transmission form, Form 1096; you don’t need this form if you are filing electronically.
For due dates for other types of 1099 forms, see the chart on pages 26-28 of the IRS’ General Instructions document.
Filing State 1099 Reports
While some states require you to submit a copy of 1099 forms for state income tax purposes, many do not because they participate in the Combined Federal/State Filing Program. Check with your state’s tax agency to see if it participates in this program.
You can file most types of 1099 forms electronically using the IRS Filing Information Returns Electronically System (FIRE System) if you have the proper software.
You can also mail 1099 forms to the IRS directly, or you can use one of the IRS-approved private delivery services. The mailing address depends on your business location. See page 7 of the IRS’ General Instructions document for a list of current mailing addresses.
If you are filing 250 or more of any one type of 1099 form, you must file electronically.
Correcting Common 1099 Filing Errors
The IRS has procedures for filing corrected paper returns or returns filed electronically.
Correcting Paper Returns
Type 1 errors are for incorrect money amounts, codes, or checkboxes, or if a return was filed when it didn’t need to have been filed. To make the correction, follow these steps:
- Prepare a new return and enter an “X” in the “CORRECTED” box at the top of the form.
- Prepare a new transmittal Form 1096 and include it with your mailing to the IRS Submission Processing Center for your location.
Type 2 errors are for a missing payee name or a missing or incorrect payee taxpayer identification number (TIN). Here are the steps for Type 2 corrections:
- Prepare a new information return, entering an X in the “CORRECTED” box at the top of the form.
- Enter “0” for all money amounts.
- Prepare a new transmittal Form 1096 and enter one of the following phrases in the bottom margin:
- Filed to Correct TIN
- Filed to Correct Name
- Filed to Correct Return
File Form 1096 and Copy A of the return with the IRS Submission Processing Center designated for your state, but don’t include a copy of the original incorrect return.
For more details on this process, see the chart on page 12 of the IRS’ General Instructions document.
If you have filed duplicate reports or have a large amount of incorrect information, contact the IRS information reporting customer-service site at 866-455-7438 for further instructions.
Correcting Electronically Filed Returns
If you find an error in an electronically filed 1099 form, you must file a corrected return. Don’t file the original form again, and file only the specific returns that were in error. If you omitted a return from a previous filing, file it as an original return.
To report a missing or incorrect taxpayer ID number (TIN), you must write to the IRS and include:
- Name and address of payer
- Type of error
- Tax year
- Payer TIN
- Transmitter Control Code (TCC)
- Type of return
- Number of payees
- Filing method (paper or electronic)
- Whether federal income tax was withheld
Send the letter to:
Internal Revenue Service
Information Returns Branch
230 Murall Drive, Mail Stop 4360
Kearneysville WV 25430
There are specific procedures for correcting one-transaction and two-transaction errors on the FIRE system. Check with your tax professional for help with this process.
The IRS issues penalties for not filing required 1099 forms or not sending these forms to recipients on time. In addition, you can be penalized if the 1099 form has significant uncorrected errors, such as missing or incorrect TINs.
What If You Receive an Incorrect 1099?
If you received an incorrect 1099-MISC or 1099-NEC form, notify the payer immediately to explain the error and request a new form. If you don’t receive a new 1099 before the time you’re required to file your tax return, check with a licensed tax preparer to see how to deal with the incorrect form.
Frequently Asked Questions (FAQs)
How long can corrections be made on a 1099?
Errors on tax forms should always be corrected as soon as possible, in part because the error could affect the recipient’s tax return. There are also penalties for filing a 1099 form that includes an incorrect TIN, which is one error that should be corrected immediately.
The IRS doesn’t set a specific deadline for correcting tax forms, but an amended tax return (Form 1040-X) must be filed within three years after the date of filing of the original return or within two years after the date the tax was paid.
How do you mail a corrected 1099?
When you have made corrections to one or more 1099 forms, complete a new 1099 form for each recipient. Mail Copy A and the corrected transmission form (Form 1096) to the IRS processing center. Give Copy 2 and Copy B to the recipient. Keep both copies of Copy C (the incorrect one and the corrected one) for your business records.
There are three designated 1099 submission processing centers for specific states. See page 7 of the IRS’ General Instructions document to find out where to send your corrected forms.