Corrections Processing

In Advantage Financial, corrections to 1099 reporting information may be entered on the 1099 Reported Income (1099R) table (either directly or via the M1099 transaction), 1099ER table, or corrections can be entered directly into the third party tool. As the 1099R table tracks the consolidated income before and after it is reported to the IRS, making such corrections within Advantage provides for an audit trail of changes made to 1099 information both before and after information is reported to the IRS.  

When an existing record is corrected on 1099R (either directly or by using the M1099 transaction) or on 1099ER, a new record will be generated with a Processing Indicator of Updated and the Current Record field set to Yes while the Current Record field of the original or previous record is updated to No.  In addition, the Apply Corrections link on the original/previous record will be disabled. Therefore, if there are multiple records for a TIN Number for a Form Type, corrections can only be applied to the most current record. If more changes need to be made on a previously corrected record, choose the Edit 1099 Reported Income link on 1099R or process a new M1099 transaction.

Any correction to an existing record will be identified as either Type 1 or Type 2 correction. Type 1 and Type 2 corrections are distinguished as follows –

• Type 1 – It includes changes for incorrect boxes (income should have been reported in box 2 instead of 3), incorrect money amount, non-amount fields, and if a form was submitted in error (return should not have been filed).

• Type 2 – It includes change in TIN, TIN Type, name, and Form Type.

If a correction is made that is a Type 2 and then a subsequent change is made that is a Type 1, the net changes will be considered as a Type 2 correction. If changes are made to a record that is neither Type 1 nor Type 2 (i.e., Comments), a record with the Processing Indicator set to Corrected will be created, however, the record will not be included on the Magnetic Media Audit report or in the text files and no corrected form will be produced. Also, changes to fields that are not classified as Type 1 or Type 2 should not impact the correction type. For example, a name change is made and then a Comment is added to the same record, the record will be classified as Type 2 correction. The addition of Comments should not change the correction type. Based on whether it is Type 1 or Type 2 correction, the Correction indicator will be determined and updated in the text files after running the Offline 1099 job in Corrected mode.

The Processing Modes of Forms and Magnetic Media only select records from 1099R and 1099ER that meet or exceed the threshold established on the TINC table when generating text files if the Compare Threshold batch parameter is set to Yes/1. If you need to change the dollar amount of a record on the 1099R table after a form has been issued to an amount that does not meet the threshold established for the Type of Income, you need to do the following:

• Change the value directly on 1099R, or via an M1099 transaction, after you have run the Offline 1099 process in Magnetic Media mode. It will then be picked up when the Offline 1099 process is run in Corrected Mode and create a corrected record to be used to generate a corrected form.

For sites using Advantage Tax Reporting, corrections or changes can be made to a taxpayer form multiple times after the physical forms have been sent to the taxpayer but before the IRS has received the data files. When it is sent to the IRS for the first time, the form will be sent as an original record. Any corrections made after it has been sent to the IRS, the form will be sent as a corrected record. For example, a 1099-MISC form was printed and sent to John Smith on January 31st. This initial record is version 1 on the F1099M table. Your site decides not to transmit the data files to the IRS until March 31st so that the IRS Transmittal File Generation process was not executed.

1. John Smith received the form on February 3rd and called to inform the department that his name was spelled incorrectly. It should be John Smithe.

2. A correction was processed on 1099R/1099ER or using a M1099 transaction.

3. After Offline 1099 was executed in the Corrected mode and Forms Table Load chain is completed, the F1099M table was updated with version 2 of the record that includes the name change.

4. On February 4th, a new form was printed and sent to John Smithe.

5. On February 7th, John Smithe called the department to notify that he should not have any income in Box 1 (assume that there are income in other boxes).

6. After some investigation, it was determined that the income in Box 1 should be removed from the John Smithe’s 1099 form. An amount change was processed on 1099R/1099ER or using an M1099 transaction.

7. After Offline 1099 was executed in the Corrected mode and Forms Table Load chain is completed, F1099M was updated with version 3 of the record that includes both the name change and amount change. No other changes were made to his record.

8. On March 31st, the IRS Transmittal File Generation process was executed and John Smithe’s record was sent to the IRS as an original record that included the correct name and amounts.

9. Let’s assume that another correction was made after March 31st. F1099M would look similar to the following:

* The Transmission Type specifies if the record will be transmitted as an original or corrected/amended record. After the initial transmission, subsequent transmissions will be generated as a corrected/amended file. Since, the record versions 1 and 2 were never transmitted, version 3 was transmitted as an original version and it includes all changes up to that point.

Refer the "1099 Business Tasks" topic in this user guide for more corrections scenarios.