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Common Form 1099 filing mistakes and how to correct them

On Behalf of | Dec 13, 2022 | Business Litigation

If you run a small business in Springboro, Ohio and have others work for you, you’ve likely completed a 1099 form while doing your taxes. This can be a complicated and frustrating task that can cause some people to make mistakes. In fact, a 1099 form is not designed to be used for official employees of your company, only those who are freelancers or independent contractors.

You don’t report backup withholdings

Many don’t happen to notice this field on the 1099-MISC form. However, if you’ve withheld taxes or payments at all from the IRS, you need to report these amounts in the field properly. If you have sent this in already and caught it before too long, you can mail Copy A and a corrected transmission form 1096 to the IRS. Make sure that the recipient gets Copy 2 and Copy B, and then keep both the incorrect and correct Copy C for your records.

You misclassify employees as nonemployee workers or independent contractors

Have you ever put in 1099 forms for an employee(s)? This is definitely something you’ll want to correct. While there are some business owners who misclassify in an effort to avoid having to pay more taxes, some genuinely are in a rush or misunderstand the purpose of this form. This is why it’s so important to take your time and ensure you’ve got the right forms.

There isn’t necessarily a deadline for these corrections, but you must file an amended tax return within three years of the date you filed the original return and two years within the date of paying the tax.

Not using separate forms

It’s crucial to remember that 1099 forms are used by the IRS as informational filings. There are a variety of 1099 forms, such as 1099-MISC and 1099-NEC, so you’ll need to make sure you’re submitting the right ones. If you fill out or send the wrong ones, you can find the correct forms on the IRS website and then file an amended return.

Not reporting non-employee compensation on 1099-NEC

All business taxpayers need to report any non-employee compensation using 1099-NEC as of tax year 2020-2021. This used to be done with 1099-MISC. If you have the 1099-MISC forms and need to report independent contractors and freelancers to whom you’ve paid at least $600 in the past year, but those forms aside and order 1099-NEC forms.

When you submit tax forms for your small business with mistakes on them, you might be overwhelmed and not know what to do. Be sure to research the tax code so that you understand what paperwork is needed.