Posted by Carmen Garcia

Finding errors on IRS Form 1099-MISC and how to fix them

Finding errors on IRS Form 1099-MISC and how to fix them

As the saying goes, to be forewarned is to be forearmed. After preparing the Form 1099 MISC forms, stop and check if the info entered is correct. Before submitting these forms to individuals and businesses for which the company has paid and submitted these forms to the IRS, review these common errors to avoid problems.

Note: Be sure to use the 2019 version of 1099-MISC for 2019 payments to non-employees and others. The 1099-MISC form will be modified this year 2020, and a new 1099-NEC 2020 form will be used to declare the compensation of dependents.

What is Form 1099-MISC?

Form 1099-MISC is one of the many reporting forms used by the IRS to report payments. The feedback is used by companies and others who carry out transactions that must be reported to the Internal Revenue Service. These reports must be delivered to the recipient and also to the IRS for all transactions for the year, with different types of 1099 modules, such as the 1099-MISC module, included in this category.

Form 1099-MISC must be given to anyone other than an employee and to any business, which includes providing this form to individual owners, independent contractors, limited liability companies (LLC).

In most cases, you should give an employee a Form 1099-MISC if you paid that person more than $600 during the year. The exception is that a 1099-MISC is required if royalty payments of at least $10 were made during the year.

Note: The 1099-MISC form will change considerably this year, with a new 1099-NEC form for the compensation of non-employees. Pay attention to the date on the application form and only use the 2019 form to report payments in 2019.

What are the Errors to Avoid?

Not Giving it to the right person

Form 1099-MISC is intended for business people, payments made during your business, and to people who are not part of your business: employees, members of the board of directors and owners are part of your business.

The IRS divides the types of payments to report with Form 1099-MISC:

Rental (section 1), Royalties (in box 2), Services (including remuneration of self-employed persons, in box 7), Awards and recognition (box 3), Other revenue payments (in box 3), and other less common types of payments.

Most businesses use 1099-MISC to report payments to non-employees in box 7. Non-employees are people who the user (the payer) did not consider employees. Your business does not withhold income tax or Social Security / Medicare for these payments.

Note: Employees do not receive Form 1099-MISC; they will receive a W-2 form that shows the payments made as employees and the deductions.

Other common 1099-MISC errors

Some of these errors can result in fines from the IRS, as explained above.

    •    By using the form for the wrong year: Use Form 1099-MISC for the year in which payments were made, not for the year in which you fill the form. For instance, for payments made in 2019, use Form 1099-MISC 2019, even if you complete the form in 2020.

    •    Not using the approved form: Form 1099-MISC cannot be downloaded, copied, and used. The red in copy A (copy sent to the IRS) is a special link that cannot be duplicated with a color copier. Forms must be gotten from an office supply company, the IRS, or corporate tax preparation software.

    •    Sending a 1099-MISC form to an employee: The employee must receive IRS Form W-2 for wages or salaries paid during work. If the person is paid for an external contract for his business, these payments can be made using a 1099-MISC form, as they are considered non-employee on the job.

    •    Incorrect or missing identification of the taxpayer: The IRS penalizes information files, such as Form 1099-MISC, for reporting an incorrect identification of the taxpayer. To verify the identification of a taxpayer, the IRS has an interactive TIN comparison service that can be used in case of questions. However, you will need to register to use this service. If the taxpayer's identification is incorrect or missing, the taxpayer will be subject to additional withholding tax. If so, you will receive a tax withholding notification from the IRS.

Mistakes not to make on the IRS Form 1099

    •    Do not include decimals and cents on amounts

    •    Do not use black ink

    •    Do not make fonts too big or too small. The IRS suggests using a 12-point email font to print the 1099-MISC forms.

    •    Incorrect format of employee name. The employee's middle name and initials are in the first box, the employee's first name is in the second box, and all suffixes are in the third box.

Other Notable Errors

    •    Filing the 1099-MISC twice.

    •    You have a different taxpayer ID on forms 1096 and 1099.

    •    Sending two or more types of information returned with a form 1096.9

IRS Sanctions for Errors in Form 1099-MISC

Some errors are easy to correct. Other errors are not, and the IRS sanctions applicants for certain errors. The fines differ according to:

    •    Company size (large employers are liable to higher fines),

    •    Type of error 

    •    Delay in registration (higher penalties, if not registered at all or for "intentional contempt")

Here are the IRS module errors that have penalties:

    •    Not filing before the expiration date

    •    Filing on paper when electronic filing is required, or sending a paper form when an electronic form is needed.

    •    Filling an incorrect taxpayer ID or tax ID

You can also face penalties related to sending the forms to beneficiaries:

    •    If you do not provide a Form 1099 to someone who should receive one

    •    If you do not include all the necessary information about your company as a player or if the data on the form is incorrect. 

How to correct errors in the 1099-MISC form

For paper forms: If you have submitted a Form 1099 Misc to the IRS and have encountered an error, please fix it as soon as possible. Then send the correct form (copy A) and form 1096 to the IRS and give the recipient an accurate return.

The IRS has an error chart to store corrected returns on paper forms to help you fix different types of errors.

If you are submitting the amended Form 1099-MISC to the IRS, you must also include Form 1096. You can find the correct address for your status in the IRS general instructions for individual information forms.

For electronic filing: For errors in the electronically-filed Form 1099-MISC, corrections can be made using paper forms, using the procedure described above, if you have less than 250 corrections.

If the error is an incorrect taxpayer name or identification number, a written letter must be sent to the IRS to correct the form.

Carmen Garcia
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