In 1099-Prep, all Federal Forms can be corrected except a W-2C and a 1042-S. Keep in mind a W-2 can be corrected once, using the W-2C. A W-2 form cannot be negated.
There are two types of corrections.
This is if you discover errors in the form data, but the payer and recipient are accurate. It is important to issue a corrected Form with the accurate information and mark it as “Corrected.” Additionally, if you’ve already furnished the original form to the recipient, you might need to provide an explanatory statement to clarify why the corrected form is being issued.
- If you reported the wrong amount in a box on the Form, you would need to issue a corrected form with the accurate payment amount.
- If you made an error on the state reporting portion of the form, you would need to correct it to ensure accurate state tax reporting.
Recalculation of Withheld Taxes
- If you withheld federal or state income tax from the payment and later realize that the amount withheld was incorrect, you would need to correct the form to reflect the accurate withholding.
Negating a Form is typically done when you have issued the form in error and want to officially nullify its effects. Voiding a form is appropriate when you’ve realized that the reported payer/recipient information is incorrect or that the form should not have been issued in the first place. Here are some scenarios when you might consider voiding a form:
- If you accidentally issued duplicate forms to the same recipient for the same payment or reporting period, you might void one of the duplicates to prevent confusion.
- If you realize that the information reported on the form is incorrect, such as the payer’s information or recipient’s information, you will negate the form to indicate that it should not be used for tax reporting purposes.
For example, if the payer’s legal name has changed due to marriage, divorce, or other reasons, you would need to negate the form.
Change in Classification
- If you initially reported nonemployee compensation on a 1099-NEC but later determine that the recipient should have been classified as an employee, you might void the form to reflect the correct classification.
Recipient Not Eligible
- If you mistakenly issued a form to a recipient who should not have received one based on the nature of the form, you might void the form to correct the error.
Payment Wasn’t Made
- If you issued a 1099-NEC for a payment that was never actually made to the recipient, you would void the form to indicate that the payment did not occur.
If you discover errors or need to amend a filed Form, you will need to take appropriate steps to correct the information. Here’s how you can negate or amend a Form:
Identify the Error
- Carefully review the original Form to identify the specific error or errors that need to be corrected. Common errors might include incorrect amounts, incorrect recipient information, or wrong check-box selections.
- Decided if this requires a correction or a negation
Verify the initial Form has been processed by the IRS
- The status of the form will need to be accepted or rejected before you can correct the initial form.
Prepare a Corrected Form
- Create a corrected or negated with the updated information based on the error identified in the first step. This form should include all the correct and accurate details, including the corrected dollar amounts, recipient information, and any other relevant fields.
- Check the Corrected Box
- On the corrected Form, verify the “Corrected” box at the top of the form. This indicates to the IRS and the recipient that this is a corrected version of the original form.
- Corrected Amounts Only
- You should only report the corrected information on the new form. You don’t need to include the original incorrect information on the corrected form.
- If you are correcting a Form after you’ve already furnished it to the recipient, you might need to provide an explanatory statement to the recipient. This statement can help clarify why the corrected form is being issued.
- File the corrected Form with the IRS using the same method you used for the original filing (paper or electronic). When you e-file, the corrected information will replace the original submission.
- Keep a copy of both the original and corrected forms for your records, along with any supporting documentation related to the correction.
- Check back to verify the Form has been accepted by the IRS.
- If you negated the initial form and the situation requires an adjustment to the Payer or Recipient, you must wait until the negation was accepted before altering that information. Once the occurs, you can add a new form of the same type for an additional filing.