Need to amend taxes for a three word change?

February 2, 2011 3:17 PM

TaxFilter: Received a 1099-MISC after filing, but I reported the income on 1040 Line 21. Do I need to amend?

Asking the hive mind before asking a professional. YANM tax attorney/accountant, etc. I was very lucky and won $1,000 in a drawing at a casino around Christmas. Yay! When it came time to work on my taxes, I listed the $1,000 as gambling winnings, non-W2G in TurboTax. It listed this on 1040 line 21 (other income) with the text "GAMBLING WINNINGS" next to it.

Literally 4 hours after submitting my tax return to the IRS, I receive a 1099-MISC in the mail from the casino. It lists the $1,000 in Box 7, Nonemployee compensation. I went back through TurboTax and modified it accordingly (Added the 1099-MISC, removed the "gambling income"). The net result is identical. The only thing that changed was that the description it put on the line was now "SEE STATEMENT L21." It did not change my AGI. My refund is identical.

Do I need to file an amended return to reflect this change? My gut says no - I claimed the amount correctly as income. I can't imagine even the most dickish auditor would have anything to say about it. What's your thoughts, hive mind?

posted by jeversol to work & money (10 answers total)

I wouldn't worry about it, but I am not a tax attorney or accountant. Especially since the net result is identical, I can't imagine it mattering. There are certain things that may red flag you for an audit. This is very unlikely to be one of them. This is not tax advice.
posted by disillusioned at 3:32 PM on February 2, 2011

My interpretation is that the 1099 is there to document your gambling winnings, which you reported as gambling winnings. So I think you are good.

But I would check the 1040 instructions to see what it says to do for that line. Turbo Tax might be being overly cautious.
posted by gjc at 3:46 PM on February 2, 2011

If an auditor came a knocking and asked why you did it the way you did, I'd explain the above, and follow it up with "and I was too lazy to submit an amended return."
posted by Mister Fabulous at 4:14 PM on February 2, 2011

I would be less worried about an audit than receiving a bill for what the IRS or your state tax authority may see as "unpaid tax." That is to say, they might assume you had gambling winnings PLUS nonemployee compensation from a casino in the same amount. Sounds dumb, I know.

Looking for uncaptured revenue via 1099s seems to be very popular lately. The IRS has stepped up enforcement and has put a lot of new 1099 regulations in place. Also, state governments facing budget crises are looking for any way to find additional tax revenue.

All in all, it may be easier and less annoying to file the amended return than to try to unwind the machinery once you've received bills from the IRS and the state for "unpaid tax," interest, and penalties.
posted by faustessa at 5:37 PM on February 2, 2011

I have recent experience with a sort-of semi-related event.

In 2008, I won a $1,000 prize. When my accountant filed the return, he reported the income in a different spot than where the IRS was expecting it. They sent me a letter this past August asking me to either pay up (with penalty) or to explain why I shouldn't. I asked my accountant about it, and he documented everything and sent the IRS a letter. The IRS replied and said, "Okay. That makes sense. Thanks!" (Well, it was a little longer than that, but that was the gist.)

So, if you think all the totals are correct, you're probably okay just letting it go. If the IRS asks in two years, you can document it. BUT LEAVE YOURSELF A GOOD PAPER TRAIL NOW so that you can remember what the heck was happening.
posted by jdroth at 5:45 PM on February 2, 2011

Interesting question. Sounds like the casino made a mistake giving you a 1099-MISC. Winnings from lotteries and raffles are usually gambling winnings, not nonemployee compensation. There's a very decent chance the IRS computers will catch this and send you a letter about it. If this is truly nonemployee compensation, you'd almost certainly owe self-employment tax on the amount. Did you perform any services for them? Could this potentially NOT be money you won from a drawing? Here is the 4-part test the casino should have applied when figuring out whether this was nonemployee compensation:

- You made the payment to someone who is not your employee;

- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);

- You made the payment to an individual, partnership, estate, or, in some cases, a corporation; and

- You made payments to the payee of at least $600 during
the year.

Imagine it from the other side (IRS perspective):

The casino reports your nonemployee compensation to the IRS. The IRS computers generate a letter to you that basically says, "Hi! We saw you did some work as an independent contractor for Casino XYZ. Looks like you forgot to charge yourself self-employment tax! According to our records, it looks like you'd owe $141 of self-employment tax."

To which you'd rightly say, "What? I never worked for a casino! I just won a random drawing! No work on my part!"

But our computers don't know that. They trust the casino more than they trust your word.

I know it's a bit of a hassle now, but call the casino and get them to correct how they reported your winnings. It will save you some further hassle down the line. Best of luck.
posted by texano at 5:51 PM on February 2, 2011

I'm not a tax guy but I've won a sweepstakes and a casino gambling payout. The sweepstakes was too long ago form me to remember. But the casino payout is more recent. I got a W-2G for that.

You say you won a drawing. So it wasn't actually gambling? I know it happened at a casino, but if they had a drawing a name from of all slot club card holders, or people who were there, then it isn't gambling. It is the same as other contest winnings.

Now if you played a game of chance, bet on a horse, bingo, etc and gambled, you should have gotten a W2-G. If it was a simple contest, it is 1099-misc. If the casino sent you the wrong form, then they need to correct that. But if it was a non-gambling contest, then it is 1099-misc.

Is it a big deal? It is possible the IRS will check its 1099s and returns and notice yours wasn't reported this way and generate a letter to you (not an audit, but a "hey our records don't match!") It could be they have a bigger threshold than $1000 to do that automatically. If you do get the letter, you can call or write with your explanation. A human will look at it and see that and you'll be OK. The IRS can be real dicks sometimes, but when under all appearances you're not out to get out of paying taxes, they'll be totally cool.

If it were me, I'd let it go since it doesn't impact the taxes I owe or refund I would receive and at the time of filing I made a good faith effort to report all income and not hold anything back.

If you're concerned, you could file an amended return and not have to worry about it coming back later.
posted by birdherder at 6:29 PM on February 2, 2011

It was a raffle drawing with no entry fee. The only entry requirement was being there at some point to put your name in a bin.

Thanks for all the answers so far. Look forward to hearing any other opinions.
posted by jeversol at 6:37 PM on February 2, 2011

For the benefit of future searchers,

Gambling income includes, among other things, winnings from lotteries, raffles, horse races, poker tournaments and casinos. It includes cash winnings as well as the fair market value of prizes such as cars and trips.

For the benefit of jeversol: at no point should you need to send us an amended return. The casino reported it wrong, not you. They're the ones who would be responsible for sending the correction (issuing you & us a form that doesn't list it as nonemployee compensation - the proper avenue would seem to be "Other Income" on 1099-MISC). If you did file an amended return with us for some reason without first getting the casino to change their reporting, you'd get a similar letter ("Hey! We noticed you're reporting nonemployee compensation. You should probably add self-employment tax to that.")

Having said that, if you prefer to sit tight for now, (and I swear I don't mean this ominously but damn if it doesn't sound that way), just be prepared to prove your side of it in about a year or so.
posted by texano at 8:28 PM on February 2, 2011

Just a follow up for anyone, the casino sent me a letter saying they issued the 1099-MISC incorrectly by putting the $1,000 as "Nonemployee Compensation" instead of "Other Income" boxes. They didn't however, mark it as a corrected 1099-MISC. Sigh. So, I guess I'll hold onto both forms and the letter and wait for my roboletter at some point. Thanks everyone.
posted by jeversol at 8:33 AM on February 13, 2011