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Forms W-2 & 1099-MISC Corrections February 1, 2017

Were you busy meeting a new IRS deadline for Forms W-2 and 1099- Miscellaneous Income?

IRS says making a small mistake on income or withholding doesn’t require a correction.

2016 Forms W-2 and 1099-Miscellaneous Income (if there is an entry on box 7 for Nonemployee compensation) were due to the IRS by January 31, 2017. That’s at least a month earlier than the year before. The problem? What if my client makes a small mistake on the W-2 or 1099 in reporting income or withholding? In prior years, the IRS never saw the mistake if we made the correction prior to the February 28 due date (March 31 for some issuers). This year, we could be caught up in issuing corrected forms to the IRS.

In a small bit of relief, the IRS says “close is close enough.” IRS issued guidance, indicating that for purposes of Forms 1099, W-2, and other information returns, being within $100 is close enough! In other words, if the Form 1099 that was issued was within $100 of the actual payment amount, then you don’t have to file a corrected Form 1099. For Federal income tax withholding, being within $25 is close enough to avoid correcting.

Of course, you always have the option to correct the forms—you’re just not required to. But if the recipient complains, the employer must issue a corrected form for the actual amount.

Tax practitioner note. If the income is overstated or the withholding understated, want to bet that the recipient demands a correction, even for small amounts?

For more information, see IRS Notice 2017-9 (Jan. 4, 2017).

Vern Hoven, CPA, MT, is one of America’s premier tax presenters and speaks to over 100 groups a year on a variety of tax topics. He teaches at Western CPE Federal Tax Update seminars and conferences and produces self-study and webcasts courses as well. Vern consistently receives outstanding evaluations and has won numerous teaching awards, including the prestigious AICPA 2014 Sidney Kess Award for Excellence in Continuing Education.
Vern is the author of the best-selling Real Estate Investor’s Tax Guide and a favorite interviewee on radio, television, and in newspapers. His presentation skills have earned him the coveted Certified Speaking Professional (CSP) designation from the National Speakers Association, which has granted only 400 CSPs out of 3,600 NSA members as of 2006.
Vern practiced in the public, governmental, and corporate accounting fields before starting his own public accounting practice in 1973, a firm that grew to one of the largest in western Montana. In 1985, he started his present tax consulting practice. CPA Magazine recognized Vern as one of the top 50 IRS representation practitioners in 2008.

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DIG DEEPER:

How The $3.5 Trillion Budget Blueprint Could Impact Your Clients

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