Many small businesses only file a handful of 1099 forms annually. This lack of familiarity can lead to confusion when it comes to filing and correcting forms as dictated by the IRS.
This guide helps small businesses better understand the rules for when they should file a 1099 as an original vs. a correction and why the timing is critical.
When You Should File a 1099
You should file a 1099 form when:
- You paid a contractor, vendor, or business for services
- The total amount paid meets or exceeds the IRS reporting threshold
- You made interest or dividend payments
- You had transactions that require a specific 1099 form
Filing is the initial submission of the 1099 to the IRS. Until the form is submitted, it is simply considered an original filing.
What if you spot a mistake before filing?
If you notice an error before submitting the form to the IRS, you should:
- Fix the information in your filing system
- Resend a corrected recipient statement if needed
- File the accurate original form
Because the form has not yet been sent to the IRS, this is not considered a correction. You are simply updating your original filing before it becomes official.
What To Do When You Already Sent the Recipient Statement but Have Not Filed With the IRS
This situation is very common for small businesses that send recipient copies early. You deliver a 1099 to a contractor, then notice a mistake before you file with the IRS. Many filers assume they must mark the next version as a correction, but that is not the case.
Key rule
A form is only considered a correction once the original has been filed with the IRS.
If you have not yet filed with the IRS, you should not check the “CORRECTED” box on the recipient copy.
Why you should not check the correction box
Marking a form as corrected indicates that the IRS already has the original version on file. When the IRS has not yet received any filing, checking this box can create confusion and lead to IRS processing issues later.
What to do instead
If you mailed or delivered the recipient statement and then updated the information before filing with the IRS:
- Update the form in your system. Make sure all fields are accurate and ready for filing.
- Prepare a new recipient statement without checking the corrected box.
- Include a simple note or insert explaining the update.
Here is recommended language:
“An updated version of your 1099 form is enclosed. This is not a corrected form because the original version has not yet been filed with the IRS. The IRS will receive the updated information shown on this statement.”
- File the updated version as the original filing with the IRS.
This approach keeps the recipient informed while keeping you compliant with IRS rules.
When You Should Correct a 1099
A 1099 is considered a correction only after the original form has already been filed with the IRS.
Corrections are required when the IRS already has the incorrect version and you need to update:
- The payee name
• The TIN (SSN or EIN)
• The payment amount
• The form type
• Any information that materially affects reporting
Once the IRS has the incorrect form on record, you must submit a corrected 1099 following IRS correction rules.
How to know if it is a correction or not
Ask yourself one simple question: “Has this form already been filed with the IRS?”
- If no, you are still updating the original.
If yes, any changes require an official correction.
Common Situations Small Businesses Face
You sent the recipient their copy early but have not filed with the IRS yet
Action: Update the form and send the revised recipient copy with a note. Do not mark it as corrected.
You filed the form and later found a mistake
Action: This requires a corrected 1099.
You forgot to file a form entirely
Action: This is a new original filing, not a correction.
You filed a form you should not have filed
Action: Submit a correction to zero out the incorrect record.
What Happens If You Do Not Correct an Incorrect 1099
If you submitted incorrect information to the IRS and do not correct it:
- You may incur IRS penalties
• Your contractor may receive inaccurate tax information
• You may trigger backup withholding rules
• You may face questions during an audit
Correcting forms promptly helps avoid downstream problems.
Tips for Small Businesses to Avoid Needing Corrections
You can prevent most corrections by:
- Collecting complete W 9s
• Verifying names and TINs
• Reviewing payment records before filing
• Using a filing platform that validates data
• Sending recipient copies after performing a quick accuracy check
A few minutes of review can prevent time consuming corrections later.
Filing Corrections Through eFileMyForms
If you use eFileMyForms, the correction process is simple. You can:
- Select the form that needs correction
• Update the information
• Resubmit it as a corrected form
• Send the updated recipient statements
This ensures the IRS gets accurate data and helps you stay compliant.
The bottom line
Understanding when to file a 1099 and when to correct one can save small businesses time, money, and stress during tax season.
The most important rule to remember is this:
- A form is only a correction once it has been submitted to the IRS
- Before filing, you can update and resend recipient statements without marking them as corrected
- After filing, any change requires an official correction
- Prepare early, validate your information, and keep your workflow simple to avoid unnecessary errors and penalties.