The number of corrected 1099s issued has increased dramatically the last few years and it looks like that trend will continue. The increase is due to 2 major changes in the tax law and the information banks, brokers and mutual funds must report.

The first change occurred in 2003. That's when the tax rate on dividends and capital gains was separated from the tax rate on your other income. Previously, you paid the same amount of taxes regardless of whether the income came from a Certificate of Deposit, a preferred stock or capital gains on a mutual fund.

The good news is that most of you are paying less in tax as a result of this change. The bad news is that banks, brokers and mutual funds companies have to report interest income on one form (1099-INT) and your dividends on another (1099-DIV). Surely that shouldn't be that difficult for those big computers they all use!

Well, nothing is ever simple with the IRS. Congress decided that only certain dividends qualify for the lower tax rate. So banks, brokers and mutual funds must wait to hear from the underlying company whether a dividend is qualified or not. If you own a preferred stock in a utility company, the utility company will have its lawyers make the determination. Then that is communicated to the banks, brokers and mutual funds.

So a mutual fund must wait for the utility to inform them if the dividend is qualified. Then the mutual fund company has to compile all that information so it can accurately report to the brokers who then must compile it and report it to you. Multiply that by tens of thousands of companies and you can see why it's a nightmare.

The second change occurred last year. Now, a 1099-INT must include tax-free interest and the amount of that interest that is subject to the Alternative Minimum Tax (AMT). If a mutual fund holds hundreds of tax-free municipal bonds, it has to determine whether each one is subject to AMT.

Over the last few years, 1099s have been sent out by the January 31st deadline only to be followed by corrected 1099s soon after. It isn't uncommon for someone who files a tax return in early February to get a corrected 1099 a few weeks later. They then dutifully go back to their accountant and pay a couple hundred bucks to have an amended return filed.

It doesn't have to be that way. There are steps that you can take that will minimize the pain and suffering caused by corrected 1099s.

First, just because you receive a corrected 1099 doesn't mean that you need to file an amended return. Most corrections are very small. The amount of taxes you owe is based on tax rate tables. Tax rate tables move in increments of $50.

If the difference between the original amounts you reported and the corrected amounts aren't going to change your bracket, then there's no need to file an amended return. If the corrections result in you getting an additional refund, and that refund is minimal, there's no need to file the amended return.

Second, you can delay filing your initial return until early April. The deadline for filing a return is April 15th. There's no rush to file it before then. You can have your return filled out and ready to go, but hold on to it until early April. If you get a corrected 1099, it's much easier to make the change on your initial return than it is to file an amended one.

Third, unless your taxes are very complicated (and most retiree's aren't), you might consider doing your own taxes using popular tax software you find at most office supply stores. The software isn't very expensive and completes your return based on your answers to some straight-forward questions. When you get a corrected 1099, you can easily go in and make the change yourself.

The chances are high that you will receive a corrected 1099 this year. Take steps now, before your file your return, and you can alleviate much of the frustration they normally cause.