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Finding Errors on IRS Form 1099 & How to Fix Them

Finding Errors on IRS Form 1099 & How to Fix Them

The law mandates every business owner to report taxes of non-employees and others on form 1099. Some common errors on the form must be corrected or reported to the Internal Revenue Service (IRS) and the payee. This article is a guide on how to fix common errors on form 1099.


1. Misunderstanding Form 1099

They have different form 1099s meant for specific tax filings. These forms relate to pensions, annuities, profit-sharing, IRAs, insurance contracts, retirement, real estate sales, and others. Sadly, some self-employed receiving income will not get the form due to filing the wrong mail or home address. In this case, you'll need to file income taxes to avoid an audit leading to more taxes, penalties, and interest. 

For example, self-employed people must file taxes above $400. Those with less than $400 but earn income from other sources must file taxes. In addition, those on contract work have higher responsibility and need to know more about Form 1099.

2. Withholding some business expenses

An independent contractor or employee may be paid for similar jobs, but the employee cannot deduct commuting costs. Conversely, a self-employed worker working from home can deduct mileage costs for going to see a client. In addition, you can deduct gas, insurance, repairs, registration, or any public transit costs. Plus, you can take depreciation expenses like computers, furniture, and machinery using Form 4562. 

3. Writing off personal expenses

The IRS does not allow the deduction of personal expenses. However, most taxpayers confuse business expenses with personal expenses. For example, you cannot deduct cell phone bills unless it is up to 50% business usage. But you can deduct computer and vehicle costs used for work purposes. In other words, you can only deduct personal items used for business purposes.


4. Writing off mileage and car expenses

As a self-employed, you can make big deductions from mileage and vehicle repair expenses. The IRS has two deduction methods – the actual vehicle expenses and the simplified method. Whatever method you choose, ensure you have accurate records such as miles, dates, and descriptions. 

Correcting Common 1099 Filing Errors

The IRS allows you to correct your paper or electronic tax filings. 

Correcting Paper Returns

The office has type 1 errors for incorrect codes, checkboxes, money accounts, or wrong filing dates. Here are ways to scale through:

  • Start a new filing and mark an X on the corrected box.

  • File a new transmittal Form 1096 and mail it to the IRS Submission Processing Center near you. 

The IRS considers any error concerning the taxpayer, such as missing payee name or TIN, as a type 2 error. Here are ways to rearrange type 2 errors.

  • Start a new filing with an X in the corrected box. 

  • Use 0 to represent money accounts.

Take a new transmittal Form 1092 and use the corresponding phrases listed below:

  • Filed to Correct TIN

  • Filed to Correct Name

  • Filed to Correct Return

However, when mailing the corrected form 1092 and Copy A, ensure not to include the original incorrect return.


Correcting Electronically Filed Returns

The electronic process does not require the original form but only a copy of the corrected error. But if it is an omitted filing, the IRS expects the original return. To report errors electronically, you must inform the IRS with:

  • The payer’s name and address

  • Nature of error

  • Tax year

  • Payer TIN

  • Transmitter Control Code (TCC)

  • Type or form of return

  • Number of payees

  • Filing method (electronic or paper)

  • Whether income tax at the federal level was withheld

Mail the letter to:

Internal Revenue Service

Information Returns Branch

230 Murall Drive, Mail Stop 4360

Kearneysville WV 25430

Remember that there are different procedures for correcting one-transaction and two-transaction errors. Ensure you contact your tax professional for help.