How are other's handling prepaid interest reporting on 1098? Are you manually changing the 1098 for borrower's that have paid ahead?

How far ahead are you talking about.

Interest received during the current year that will properly accrue in full by January 15 of the following year may be considered received in the current year, at your option, and is reportable on Form 1098 for the current year. However, if any part of an interest payment accrues after January 15, then only the amount that properly accrues by December 31 of the current year is reportable on Form 1098 for the current year. For example, if you receive a payment of interest that accrues for the period December 20 through January 20, you cannot report any of the interest that accrues after December 31 for the current year. You must report the interest that accrues after December 31 on Form 1098 for the following year.

I understand that. But I'm wondering how others are making sure the correct amount is reported. Do the reverse the negative interest or do they manually change the 1098 forms? Just looking for opinions/advice.

Well, if your loan servicing system software is not handling it correctly, they would be my first stop. I doubt there are too many banks that have to manually get involved with year-end 1098 reporting, as you could be talking about thousands of loans.