1099 Tax Software Blog

A replacement arises when you electronically submit a file to the IRS and the file comes back as “Bad”.  You put together a new file to replace the bad file that was originally uploaded.

A correction arises when you electronically submit something to the IRS and the file comes back as “Good”. Then later (maybe days, maybe weeks, maybe months) after you have efiled you realize that you transmitted payee data that was erroneous.   You need to paper file or electronically file information returns that correct just the records that were erroneous.

A few comments before we lay out the steps to efiling corrections.

1. You can only electronically correct payee or recipient data.  The IRS says in Publication 1220 “[i]f an error is discovered in reporting the payer (not recipient) name and/or TIN, the payer should write a letter to the IRS” which explains the payer error in detail.  They also provide a mailing address to where you can mail these types of corrections.
2. If the file status is “Good, Not Released”, then you have a 10-day window where you can call the IRS and ask them to delete the file before it is released.  You call the IRS at 866-455-7438 x3 and provide your TCC number and the file name and while you are on the phone the IRS agent can delete that file.  You can then Check File Status to verify that the file is deleted.  If the file is deleted in time, you can then efile a new original and this time make sure there are no errors in the file.
3. If you transmitted a file of 100 records and one (1) of the records has erroneous data, then you put together a correction for just this one record and not resubmit the entire file.
4. The payer/filer must furnish corrected information returns to the recipient.  You don’t have to re-mail to the recipient but you can if you want to.  You can print out and hand a corrected Copy B to the recipient, fax or email a corrected Copy B to the recipient or just let the recipient know what the change is.

If the file status is “Good, Not Released”, then you have a 10-day time-frame where you can call the IRS and ask them to delete the file before it is released.  The IRS phone number is 1-866-455-7438 x3 and you provide your TCC number and the file name and the IRS can pinpoint the file and delete it.  If the file status is “Good, Released”, then you need to efile a correction.

There are 2 types of corrections:  1-step and 2-step correction.

A 1-step correction generally arises when you are correcting a money amount or if the information return should have not been efiled (in which case you are voiding the transaction).  Put together:

• A file with just the records you are trying to correct
• Put a check in the corrected box
• Use the correct money amount or use 0 if you are trying to void a transaction).
• Transmit as a correction.

The software will automatically update the 1096 (or transmittal summary).

A 2-step correction typically arises when you are correcting a name/TIN of the recipient.  You need to put together 2-files of just the records that you are trying to correct.  The first file has the original incorrect payee name and/or TIN that you transmitted, the money amounts set to 0 and the corrected box checked.  This first step essentially voids the original transaction.  The second file has the correct payee name/TIN, the correct money amounts, and the corrected box checked.  You then upload both the 1st and 2nd step as corrections.

We can efile corrections on your behalf.  We do charge for that service. Just email us at info@1099fire.com or call our sales office at (480) 460-9311 and they can get you started.

Not every Form 1099 submitted to the IRS is correct, and there are many types of errors that can creep into this form, especially if you issue many 1099s each year.  There are different processes for correcting and amending a 1099, depending on whether you are a recipient or the one who filed the incorrect form.  Form 1099 may be filed by paper or electronically.

Steps for Recipients of an Incorrect Form 1099

Most 1099s deal with independent contractor income, using Form 1099-MISC.  If you receive multiple 1099s there is a chance of errors, so the first step is to check the 1099 as soon as your receive it against your own records.  Since February 2^nd is the deadline in 2015 to receive a 1099, you will have at least a month until the issuer must submit the form to the IRS on March 2^nd , or even later on March 31^st for those who file electronically.  Of course, some issuers may send both at the same time, but if you check the form as soon as you receive it you should be able to contact them in time to have a new, correct form sent to you.

Even if the form has been sent to the IRS, you can request a “corrected” form from the issuer.  The “corrected” box will inform the IRS that this is a new version of the one already sent.  If the issuer wont send you a new form, then you will have to handle the incorrect form yourself, and explain the discrepancy or mistake to the IRS in an attached statement.

Steps for Issuers of an Incorrect 1099

The steps for correcting a 1099 that you may have issued depend on the type of error.  The most common type of error will be incorrect money amounts listed on the form, and in this case the remedy is to simply prepare a new 1099 with the box marked “corrected”.   Correct the information and file the new form.  This is the same process to use if the name or address were entered incorrectly.

Forms that have errors in recipient tax identification numbers, or incorrect name AND address have a slightly different process for correction.  You first prepare a new 1099 marked “corrected” with the exact same information as the original return, but enter zero for payment amount.  This alerts the IRS that there was a problem.  Then prepare a new form with the correct information and submit it as though it is an original, without marking the “corrected” box.  This identifies the second form as the correct version for the IRS.

There exists a 1-step and a 2-step corrections which depends on the nature of the error.

It is important to first differentiate between a correction and omission.  If you submitted a file and it is processed by IRS/ECC-MTB, and you later discover that certain information returns were omitted or left out from the original file, then you need to create a separate file with the omitted returns and resubmit.  If you submitted a file and it was processed by IRS/ECC-MTB, and you later realize that the file has erroneous, then you need to file a correction of just those records.

If the dollar amounts or address are incorrect and/or a return was filed when one should not have been filed, the correction is a one-step process. Simply prepare a new information return and enter an “X” in the Corrected box at the top of the form. Enter the payer, recipient and account number information exactly as it appeared on the original incorrect return. Enter all correct money amounts in the correct boxes as they should have appeared on the original return and enter the recipient’s correct address. If a return should not have been filed, enter “0” (zero) for all dollar amounts. Submit the corrected returns with an Annual Summary and Transmittal of U.S. Information Returns (Form 1096).

If the recipient’s identification number was incorrect or missing when originally filed or the recipient’s name was wrong, correcting these errors is a two-step process. First, prepare a new information return with the payer, recipient and account number information exactly as it appeared on the original incorrect return and enter “0” (zero) for all the dollar amounts. Enter an “X” in the Corrected box at the top of the form. The second step is to prepare another new information return with all the correct information. DO NOT enter an “X” in the Corrected box on this return. Submit both returns to the appropriate service center accompanied by a completed Form 1096. Enter the words “Filed to Correct TIN, Name and/or Address” in the bottom margin of the form.

If the original information return was filed using the wrong type of return, follow the two-step procedure above with one exception. Enter the words “Filed to Correct Document Type” in the bottom margin of the Form 1096.