Making a 1099 correction isn’t something most businesses deal with often — but it’s worth knowing how to handle just in case. The reality is that filing 1099s involves a lot of details: payment amounts, taxpayer identification numbers (TINs), and recipient names. Get one number wrong, and the IRS matching system will flag the discrepancy.
But mistakes can happen. Perhaps you reported the wrong payment amount or used an old TIN. Or maybe you sent a form to the wrong person. Whatever the error, the IRS is likely to spot it. To process 5.2 billion information returns annually, they automate everything, so not much slips through the cracks.
Key takeaways
- Correcting a 1099 involves filing the same form type with updated details
- The IRS classifies errors as Type 1 (money-related) or Type 2 (identification-related), and both require a 1099 correction
- Small mistakes under $100 usually don’t need fixing unless the payee asks
- Payroll software reduces 1099 corrections by keeping payment data clean and consistent from the start
The fix isn’t complicated, but timing matters. Correct within 30 days, and penalties are lower. Wait too long, and the costs add up quickly. Here’s what you need to know about when a mistake actually requires a 1099 correction — and how Uncle Sam categorizes different types of errors.
When do you need to correct a 1099?
So, when does a mistake actually require you to correct a 1099? Anytime the information on your original form is wrong. The possible scenarios vary and can include:
- Incorrect payment amounts: Report $10,000 when you actually paid $15,000, or include reimbursements that shouldn’t count as income? These errors affect how much tax your 1099 workers owe, which means the IRS cares a lot.
- Taxpayer Identification Number (TIN): If you get the Social Security number or Employer Identification Number (EIN) wrong, Uncle Sam won’t be able to match your form to the recipient’s tax return. Their system sees a payment with no owner attached to it.
- Form type: Using the incorrect form for contractors may be a 1099 NEC vs. 1099 MISC problem. If you sent a 1099 when the person needed a W-2, you might be looking at a more serious employee vs. independent contractor issue.
- Payment classification: These errors may seem minor, but they matter. Put income in the wrong box, and you change how it must be reported.
All this said, not every misstep requires a correction. The IRS has a “de minimis” safe harbor. What this means is that if your dollar error is $100 or less, or your withholding error is $25 or less, you don’t technically need to file a correction. Keep in mind that the recipient can request one, though, and then you must provide it regardless of error size.
If that feels like a lot to keep straight, here’s a quick-reference table that summarizes the most common scenarios.
| Mistake |
Does it require a correction? |
Why it matters |
| Incorrect payment amount |
Yes |
Changes how much tax the recipient owes |
| Wrong TIN (SSN or EIN) |
Yes |
IRS can’t match the payment to the recipient |
| Wrong form type (1099-NEC vs. 1099-MISC) |
Yes |
Income may be reported incorrectly |
| Income reported in the wrong box |
Yes |
Affects how income is taxed |
| Dollar error of $100 or less |
Usually no |
Falls under IRS de minimis safe harbor |
| Withholding error of $25 or less |
Usually no |
Correction only required if recipient requests it |
Once you know when a correction is required, the next thing to understand is how the IRS classifies different 1099 mistakes.
Understanding Type 1 vs. Type 2 errors
The IRS splits 1099 errors into two categories: Type 1 and Type 2.
Type 1
Type 1 errors are money errors, such as wrong payment amounts or incorrect tax withheld. Basically, these errors involve any dollar figure affecting tax calculation.
What it means
These errors change how much tax someone owes. Report $5,000 when you actually paid $50,000 to independent contractors? That’s Type 1. The recipient probably owes way more tax than they’d planned for, which means the IRS cares a lot about catching these.
Type 2
Type 2 errors cover ID and admin details like wrong employee name, missing address, or bad TIN.
What it means
Type 2 errors don’t change tax amounts, but the IRS can’t match the form to the right person. A 1099 with the right payment but wrong TIN can create similar problems as wrong payment amounts.
Both error types need correction. But the IRS escalates penalties faster for Type 1 errors when you file very late.
Some mistakes don’t fit neatly into either category. If you issued a 1099 to someone who should’ve been treated as an employee, you’re dealing with a W2 vs. 1099 issue. That’s not a quick form fix — it means the worker was classified incorrectly from the start.
The chart below outlines how the IRS views each type of error.
| Error type |
What it includes |
Why the IRS cares |
| Type 1 (money errors) |
Incorrect payment amounts, wrong tax withheld |
Affects tax owed |
| Type 2 (ID/admin errors) |
Wrong name, address, or TIN |
IRS can’t match the form to the taxpayer |
| Misclassification issues |
Issuing a 1099 when a W-2 was required |
Not a form fix — requires reclassification |
Now that you know how the IRS defines 1099 errors, let’s walk through how to fix one.
Deadlines and penalties to watch for
Once you file a corrected 1099, timing matters. The longer you wait, the more you’ll pay in penalties. For tax year 2025, penalties per form are:
- $60 if you correct within 30 days of the deadline
- $130 if you correct after 30 days, but by August 1
- $340 if you correct after August 1 or never file
- $680 for intentional disregard (no cap)
Here are the filing deadlines you need to know:
- Paper filings: February 28, 2026
- Electronic filings: March 31, 2026
- Form 1099-NEC: February 2, 2026, no matter how you file (because January 31 falls on a weekend, you had until the next business day: Monday February 2).
The IRS may waive a penalty if something serious delayed the correction — a flood, a medical emergency, that kind of thing. Forgetting or being busy does not usually count.
We’ve covered a lot of ground. To help you avoid 1099 trouble in the first place, we asked CPA and small business consultant Peggy James to share a few practical tips.
“Request tax IDs (Social Security number or Employer Identification Number) before issuing payments to vendors or contractors by requesting they complete Form W-9. This way you know you’re receiving accurate information, and this limits the opportunity for mistakes.”
— Peggy James, CPA
And here’s a couple of other items Peggy says to keep in mind.
- Use automated processes whenever possible: This limits errors that can come with manual data entry.
- Review data before issuing 1099s: Part of your year-end process should include reviewing the data that will be included on 1099 forms, including total amounts paid for the year. It can also be helpful to have a second set of eyes on the information by having a different person review the data than the person who input it.
Simple with responsive support
“I highly recommend OnPay. It’s very user-friendly, and if I ever need help, their support team is easy to reach and always responsive. Direct deposit for 1099 contractors is simple to set up and use.”
— Nina Koen, Koen Counseling and Wellness Center,LLC
Preventing errors is ideal — but having the right tools in place makes a big difference, too.
How payroll software helps you fix 1099 mistakes
Most 1099 errors are due to human error. 1099 software avoids this by pulling data directly from your payroll records and generating forms automatically. The result is fewer IRS mismatches and cleaner year-end records. OnPay handles this process by tracking payments throughout the year and filing forms at year-end. The system catches issues before they reach the IRS, so you spend less time fixing errors and more time running your business.
Get started with OnPay to see how automation prevents errors and simplifies filing.
