Find Errors on Form 1099-MISC - and How to Correct Them
Being forewarned is forearmed. After you prepare Form 1099- MISC forms, stop and make sure they are correct. Before you send these forms to individuals and businesses your business has paid and you file these forms with the IRS, review these common errors to avoid problems.
What is Form 1099-MISC?
Form 1099-MISC - Miscellaneous Income is one of several information forms used by the IRS for reporting income. The 1099-MISC must be sent to anyone to whom you paid $600 or more in a calendar year. The forms must be provided to payees no later than January 31 of the following year and filed with the IRS on January 31, along with a transmittal form 1096.
Form 1099-MISC is not to be given to employees. You must give employees a W-2 form in January each year to report their earnings for the previous year.
IRS Penalties for Form 1099-MISC Errors
Some form errors are easy to fix. Other errors are not. And the IRS penalizes filers for some errors. The penalty amounts are different, depending on:
- The size of the business (larger employers face higher penalties),
- The type of failure, and
- The lateness of the filing (higher penalties if not filed at all or for "intentional disregard")
Here are the IRS form errors that have penalties:
- Not filing by the due date
- Filing on paper when required to file electronically
- Not reporting a Taxpayer ID or reporting an incorrect Tax ID
- Not filing a paper form that's machine-readable.
You may also face penalties related to giving forms to payees:
- If you don't give a 1099-Form to someone who should get one
- If you don't include all the required information about your business as payer, or
- If the information on the form is incorrect.
When Must the 1099-MISC be Filed?
The deadline for all 1099 forms is January 31 of the year after the tax year. The deadline is the same for giving the form to recipients and filing it with the IRS. There are no extensions allowed. You can find more information about this change in this article about the annual payroll tax report deadlines.
Biggest 1099-MISC Error - Failing to File the Form
Form 1099-MISC must be given to any individual who is not an employee and any business (that includes giving this form to sole proprietors, independent contractors, partnerships, and limited liability companies (LLC's)) to whom you paid $600 or more in a calendar year, including all contractors and all attorneys.
Even if the person is not "in business" and does not have a business identify, if you paid them $600 or more during the year, they must receive a 1099-MISC.
There are several exceptions. The two most common exceptions are:
- Corporations (but law firms that are corporations must receive a 1099-MISC) and
- Wages paid to employees.
There are many other exceptions to this requirement for filing a 1099-MISC form. Check with your tax professional if you aren't sure if you should give someone this form.
Other Common 1099-MISC Errors
Some of these errors can mean penalties by the IRS, as explained above.
Using the form for the wrong year.
Use the 1099-MISC form for the year the payments were made, not the year you are completing the form. For example, for payments made in 2019, use the 2019 1099-MISC form, even though you are completing the form in 2020.
Not using the approved form.
You cannot download the 1099-MISC form, copy and use it. The red on Copy A (the copy that is sent to the IRS) is a special ink that can't be duplicated with a color copier. You must get the approved forms, from an office supply company, the IRS, or a business tax preparation software program.
Sending a 1099-MISC form to an employee.
Employees must receive IRS Form W-2 for wages or salaries paid to them in the course of their employment. If the person is paid for outside contract work for your business, those payments may be made with a 1099-MISC form. It's complicated; check with your tax advisor for questions about who should receive Form 1099-MISC and read more about employees vs. independent contractors.
Incorrect or missing taxpayer ID.
Anyone to whom you are providing Form 1099-MISC must have a taxpayer ID on file with you. You must first request a taxpayer ID from each payee on Form W-9. Taxpayer IDs for a 1099 form can be a Social Security number, a business tax ID number (an Employer ID Number), or a special ITIN, for people who aren't eligible for any other tax ID number.
The IRS penalizes filers of information returns like Form 1099-MISC for reporting an incorrect taxpayer ID. To check on a taxpayer ID, IRS has an Interactive TIN Matching service that you can use if you have questions. You will need to register, and there are tutorials to help you with the service.
Failing to include a transmittal form (Form 1096).
Unless you file your 1099- MISC forms with the IRS electronically, you must include a transmittal form 1096 which summarizes all the numeric information on all the 1099-MISC forms. A separate 1096 must be included for each different type of 1099 form filed by your company. Here is more information on how to submit transmittal form 1096. The deadline is still the same.
Making form errors.
Using financial software can help you avoid many of these errors on W-2 forms, especially form errors, and your software can warn you when you are reaching the Social Security maximum wage amount
- Failing to include decimal and cents on amounts
- Failing to use black ink (making entries too light)
- Making entries too large or too small. The IRS suggests you use 12 pt. Courier type font for printing 1099-MISC forms.
- Mis-formatting employee name. Employee first name and middle initial goes in the first box, the employee surname goes in the second box, and any suffix (like "Jr.") goes in the third box.
Other IRS 1099 Form Penalties
Other IRS penalties for information returns (including Form 1099-MISC):
- Failing to file by the deadline
- Failing to include all the required information
- Including incorrect information
- Filing on paper when required to file electronically (large businesses)
- Reporting an incorrect TIN (
How to Correct Errors on Form 1099-MISC
The process for correcting Form 1099-MISC errors is slightly different, depending on whether you are filing paper forms or filing electronically.
For errors on paper forms, the general instructions from the IRS say to make the correction on a new form and check the "Corrected" box at the top of the form. There are other differences in how to correct the form, depending on the type of error. The IRS instructions on Information Returns form has details for you to follow.
For errors on electronically filed 1099-MISC forms, you may make corrections using paper forms, using the process described above, unless you have 250 or more corrections to make.
If the error is an incorrect taxpayer name or ID number, you must send a written letter to the IRS to correct the form. The instructions for Form 1099-MISC have details on how to write this letter.
For More Information about Form 1099-MISC
The IRS has a specific web page dedicated to information about Form 1099-MISC.