Missed 1099 form. How much trouble could I get in?

January 8, 2013 8:27 AM

Missed 1099 form. How much trouble could I get in? (You are not my tax lawyer. Understood but seeking advice)

Background: I am a student who works part-time, and my annual income is below the federal tax rate. Although not necessary, my parents insisted I file a tax return for 2011, which they helped me submit to the IRS before last year's deadline. Recently going through old paperwork from the last year (and being extremely unorganized), I realized I forgot to include the amount from a 1099-INT form I received last year; $125 as a promotion for opening a new bank account. As of now, I have not been contacted about the IRS for missing this form or reporting incorrect income amounts. After doing research it appears I may be able to file an amended return, but I'm unclear on whether I will be penalized for not reporting this sooner. Given my circumstances and the fact that even with the $125 I would not qualify for federal taxes, I'm unsure if it's better to try to amend the return at this point; I've heard from some the IRS automatically matches up 1099 forms with the amount you report, and others who claim that in my situation its unnecessary to report it and that if I do I risk the immediate penalty. The latter's argument is that if I was going to hear from the IRS about this, I would have heard already and they simply neglected to notice this error on my part. Please let me know what you think my best course of action is and if further information would be helpful. Thank you!

posted by anonymous to law & government (15 answers total)

The IRS already knows about it (the bank sent them a copy of the 1099-INT) and they know you don't owe any tax. Penalties would only apply if you actually owed any tax. Don't worry about it. File an amendment if you want, but since you weren't even required to file, you are not and will not be in any trouble.
posted by kindall at 8:33 AM on January 8

It is OK!!! File an amended return. You only pay penalties if you owe them money, which you say you will not. Even if you did owe penalties, it would be proportionate with the value of the taxes you would owe on that $125, i.e. not much, and they would likely let you do a payment plan if you could not pay it.

I mean, probably you could go ahead and *not* file the amended return, and no one would ever notice, but you will feel better if you file it, it seems like.
posted by mskyle at 8:34 AM on January 8

Chances are, you'll be fine no matter what you do. Generally, you'd only owe penalties if you somehow ended up owing them money and didn't pay on time.

The correct course of action is to file the amended return so that everything is correct.
posted by gjc at 8:35 AM on January 8

I've actually owed them a significant chunk of money due to an error on my part, which I payed when it was pointed out to me, and was not charged any penalties.
posted by Kid Charlemagne at 8:40 AM on January 8

There is no obligation to file a return if you do not owe taxes. So, if amending your return to reflect this $125 would still give you zero tax liability to the government, there is no point in filing an amended return.

Of course, feel free to file an amended return if it would make you feel better to "do the right thing". (which I sense is the case)
posted by Tanizaki at 8:49 AM on January 8

I wouldn't worry about it. If you don't owe there is no real point in filing an amended return that will have zero material impact on your tax liability. If you want to feel better about not sending the amended return consider that your doing so will actually cost the government some non-zero amount of money.
posted by COD at 8:52 AM on January 8 [1 favorite]

You're worrying way too much. Like a squirrel, I have money stashed in various caches and investments that I sometimes forget about until I check my records, so my taxes are almost always wrong to a slight degree - usually because of the interest from bank accounts, which is a pittance. Yet in almost 20 years, the IRS has only investigated me once (when my employer went out of business and embezzled from my 401k, thus changing my tax liability) and a letter explaining what happened and offering to bear witness against him was enough to set them straight.

The IRS doesn't care about the chump change from accidental mistakes. At most, they'll send you a letter asking you to send them a check for the difference. They go after the deliberate stuff.
posted by wolfdreams01 at 9:07 AM on January 8 [1 favorite]

BTW even if you want to file an amended return (up to you) just wait and do it with your 2012 taxes.

As a rule of thumb for the future, I think the specter of the IRS (likely perpetuated by H&R Block and their ilk) is much worse then the reality and I've found them rarely punitive through my fuckups in the past.

They basically just want to get paid and will generally provide every opportunity to make right any mistakes you make with very few penalties (which can be frequently waived if necessary).
posted by bitdamaged at 9:26 AM on January 8

There is no obligation to file a return if you do not owe taxes.

This is incorrect. IRS Publication 501 says:

If you are a U.S. citizen or resident alien, whether you must file a federal income tax return depends on your gross income, your filing status, your age, and whether you are a dependent… The filing requirements apply even if you owe no tax. [emphasis added]

Just file an amended return.
posted by grouse at 9:48 AM on January 8

By "owe no tax" that sentence you've quoted means you have already paid all the tax you should be paying (through withholding or estimated payments) and do not owe any additional tax. You are indeed required to file in that case. However, since penalties are based on the amount you underpaid, if you don't owe any more tax than you have already paid (i.e., you are due a refund), there's by definition no penalty for not filing. Most people will want to file because it means they get a refund, however.

If your gross income is not high enough to pay taxes, you "owe no tax" in the sense that you do not need to pay any income tax at all, and in this case you indeed do not need to file, although again, you'll want to if you have had any withholding.
posted by kindall at 10:07 AM on January 8 [1 favorite]

Don't bother filing an amended return. I say this as someone who has had very complicated tax returns in the past, and I understand the importance of keeping track of things, but:

Unless $125 bumps you into a higher tax bracket, I wouldn't worry about it. If the IRS finds an error on your tax return - and unintentional errors are extremely common, by the way - they will send you a letter explaining the error and what you need to do (if anything).

Chill out.
posted by ablazingsaddle at 10:22 AM on January 8 [1 favorite]

If your gross income is not high enough to pay taxes, you "owe no tax" in the sense that you do not need to pay any income tax at all, and in this case you indeed do not need to file

From personal experience I have had to file tax returns because I met the other requirements in that publication while I had zero income tax liability whatsoever for the year. It is overly simplistic and simply wrong to state that not having to pay income tax means that you do not need to file income tax.
posted by grouse at 10:38 AM on January 8

Call the IRS. When I've spoken with them, their representatives have invariably been amiable and competent. I had a similar issue and never felt patronized or judged; they were only interested in helping me resolve it, even to the point of sending me copies of some paperwork I'd lost. They will give you a no-BS answer without any of the variability you're encountering here, and do whatever needs to be done on their end to help you fix it. It's no big deal.
posted by itstheclamsname at 1:18 PM on January 8 [1 favorite]

I have a complicated tax situation, and am chronically disorganized, so in the last 10 years I have misfiled (accidentally ignored a 1099 or done the wrong thing with a K1) about 5 times. Each time, the IRS has sent me a polite letter suggesting I may have made an error, suggesting what they think the error was, proposing a dollar amount to fix it (including a penalty based on a percentage of the amount due), and then advising me of my various rights to question, complain, appeal, or otherwise delay paying them their money. I have never "gotten in trouble." I have never been audited. This is totally routine for them, and probably happens about a million times a year.

Do nothing. The penalty on zero is zero. If it matters, they will let you know, but it doesn't sound like it does.
posted by ubiquity at 2:37 PM on January 8

Every time I've made an error on my taxes that amounted to anything, the IRS has sent me a letter telling me that I either owe them more or that they will be sending a larger return because I forgot something and they owe me a larger refund. If the error is of no consequence, they don't send a letter. I wouldn't worry about it.
posted by quince at 3:08 PM on January 8