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Tips Knowledge Base |
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Topics in 'Correction Processing' |
| How to correct Information Returns (1099, 1098, 3921, 3922, 5498, W-2G). |
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| How to import corrected Information Returns (1099, 1098, 3921, 3922, 5498, W2G). |
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Tips |
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| How to correct Information Returns (1099, 1098, 3921, 3922, 5498, W-2G). |
If you filed an Information Return with the IRS and later discover you made an error on it, you must
Correct it as soon as possible.
Furnish statements to recipients showing the correction.
File the correction with the IRS.
The steps required to correct an error depend upon the type of error.
If you discover an error in reporting the payer name and/or TIN.
Write a letter to IRS/IRB containing the following information:
Name and address of the payer
Type of error (including the incorrect payer name/TIN that was reported)
Tax year
Payer TIN
Transmitter Control Code (TCC), if applicable
Type of return
Number of payees
Filing method (paper, electronic)
Was Federal income tax withheld?
Send the letter to
Internal Revenue Service
Information Returns Branch
230 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430
IRS will contact you with further instructions.
If you discover duplicate reporting or that a large percentage of incorrect information has been filed.
Contact the Information Reporting Customer Service Site at 1-866-455-7438 for further instructions.
If you discover an Error Type 1
Also referred to as a 1-Transaction error, Error Type 1 includes
Incorrect money amounts
Incorrect distribution code(s)
Incorrect check boxes
A return was filed when one should not have been filed.
1-Transaction errors require only one return to make the correction. Account Ability uses the CORR(G) check box to indicate a 1-Transaction correction (see Correcting Returns with Account Ability below).
If you discover an Error Type 2
Also referred to as a 2-Transaction error, Error Type 2 includes
No payee TIN (SSN, EIN, QI-EIN, ITIN)
Incorrect payee TIN
Incorrect payee name
Incorrect payee address
Wrong type of return was filed.
2-Transaction errors require two returns to make the correction, an IDENTIFYING return and a CORRECTING return. Account Ability uses the CORR(G) and CORR(C) check boxes to indicate the IDENTIFYING and CORRECTING returns, respectively. The IDENTIFYING transaction is simply the original return with the CORR(G) indicator checked and all dollar amounts set to ZERO. When IRS receives the IDENTIFYING and CORRECTING returns, the original is matched against the IDENTIFYING return and replaced with the CORRECTING return.
Correcting Returns with Account Ability
Account Ability facilitates the correction process by maintaining each filer's corrected returns under a distinct Client ID. When the Corrected Returns Only indicator, located on the General page of the client's master, is checked, the client is regarded as a Correction Client and all of the client's Information Returns are regarded as correction returns. The CORR(G) and CORR(C) check boxes appearing at the top of each Information Return's user interface will be enabled if, and only if, the client is a Correction Client.
1) Create a Correction Client
a) From the Module menu, select Client (Filer) Management.
b) Click once on the client whose returns are to be corrected.
c) Select Copy... from the File menu to display the Copy Filer dialog.
d) Enter a Client ID to be used for the Correction Client.
e) Check the Corrected Returns Only indicator.
f) Click OK.
The client you just created will be used for all of the selected client's correction returns.
NOTE: Account Ability displays the Correction Client's ID in green.
2) Open the Returns to be Corrected
a) Double-click the Correction Client's ID.
b) Open the Information Return to be corrected.
3) Enter your Corrections
a) Select New... from the File menu.
b) Check the CORR(G) check box.
c) Determine if you will require a 1-Transaction or 2-Transaction correction.
d) Click the Locator icon  displayed directly after the TIN Type field in order to locate the return to be corrected.
e) After locating the return, click either the 1-Transaction button or 2-Transaction button.
f) If 1-Transaction is clicked, the original return is displayed with the CORR(G) indicator checked. Simply enter and save your corrections.
g) If 2-Transaction is clicked, the IDENTIFYING transaction is automatically created. Next, a CORRECTING transaction is created but not posted. Enter and save your changes on the CORRECTING transaction.
After all corrections have been entered, print and mail all recipient copies, even the IDENTIFYING returns. If you plan to file with IRS on paper, print Copy A for IRS and Form 1096. If you plan to file electronically, you must append the CORR(G) and CORR(C) transactions to the IRSTAX file in two steps - first the CORR(G) transactions, next the CORR(C) transactions. The resultant IRSTAX file should be transmitted to the IRS FIRE System as a Correction file.
NOTES: For more information on correcting returns, see the IRS General Instructions selection on the User Manuals selection of the Help menu. |
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| How to import corrected Information Returns (1099, 1098, 3921, 3922, 5498, W2G). |
In order to correct a filer's Information Returns, a correction client must be used. A correction client is one whose 'Corrected Returns Only' indicator is set.
When a correction client's Information Returns are opened, the CORR(G) and CORR(C) indicators are enabled, however, the 'Import -> ASCII Text File' selection on the 'File' menu is disabled. There is a simple reason for this!
The CORR(G) and CORR(C) indicators serve a special purpose in the correction process. More specifically,
CORR(G) should be checked to indicate either a one-transaction correction or the identifying transaction of a two-transaction correction.
CORR(C) should be checked to indicate the correcting transaction of a two-transaction correction.
NOTE: For details on one-transaction and two-transaction corrections, refer to IRS Publication General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and W-2G.
Improper setting of these indicators can result in IRS penalties. This is why Account Ability disables the importing of correction returns. For those familiar with the correction process, there is a workaround that will enable you to import correction returns from a text file.
Here's the workaround:
a) Create the correction client as usual.
b) Open the returns to be corrected.
c) Select 'Edit Filer...' from the 'File' menu.
d) Uncheck 'Corrected Returns Only'.
e) Click OK to close the 'Edit Filer' dialog.
f) Import your text file of correction returns as usual.
g) Select 'Edit Filer...' from the 'File' menu.
h) Check 'Corrected Returns Only'.
i) Click OK to close the 'Edit Filer' dialog.
j) Select 'Set Corrected (G) Indicators' on the 'Tools' menu.
All of your correction returns have been marked as one-transaction corrections. If two transactions are required, simply edit the appropriate returns. |
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