Q: I didn’t file my tax return until early April because all my 1099’s and other tax documents didn’t arrive until very late. And then, two days after filing my return I received a corrected 1099 from my investment advisor. Aren’t these forms supposed to be out by the end of January? Why is it so hard to get them right the first time? And now do I have to amend my return?
A: You are not alone in your frustration regarding the filing and receipt of tax information forms such as your W-2 which reports your wages, tax withholding, and certain benefits from your employer; your various Forms 1099 which report many different types of income including interest, dividends, non-employee compensation, rents, royalties, security sales, and other sources of income; and Form K-1 which reports your share of income from partnerships, S corporations, Limited Liability Companies, trusts, and estates.
Many of these forms are due the end of January, but not all. Some of the forms such as Form 1099-B, reporting sales of securities, and Form 1099-S, reporting sales of real estate, are not due until mid-February. But beyond that, the IRS does grant an additional 30 day extension in many cases. Worse still, Forms K-1 are not due until the entity’s tax return is filed, which could delay your receipt of the form until September 15th if the partnership, S corp, or trust return is extended.
Corrected 1099’s are not uncommon and you are not the only person to receive a corrected form after filing your return. Perhaps because of the volume of transactions and complexity of our modern financial markets, informational reports often are issued with preliminary information in order to meet the required deadlines. Consequently, corrected forms must be issued when the final numbers are available.
Regardless of the reason for the corrected form, you should consider filing an amended tax return. Normally these corrected Forms 1099 are due to reclassifications between ordinary and qualified dividends, non-taxable dividends, and capital gain distributions. Often the reclassifications amount to just a few dollars and even less tax. But occasionally the corrections are more significant. You will need to determine whether the change in the tax merits the cost of amending your return, but if you don’t amend be aware that you may receive a letter from the IRS.
An amended tax return for an individual is filed on Form 1040-X, Amended U.S. Individual Income Tax Return, which is used to correct many different types of errors, including your filing status, reported income, or incorrect or missed deductions or credits on your original return. Amended returns must be paper filed – no e-filing is allowed. Any schedules, attachments, or other IRS forms that clarify the change should be attached. Also, Part III of the Form 1040-X requests an explanation for the change which should be completed with as much detail as possible.
If you owe additional tax with the amended return pay it as soon as possible to avoid any penalties and/or interest that may be assessed. But in the happy instance where you are due a refund you will need to be patient since it can take the IRS twelve weeks to process the return. Also, if you are due a refund on your original return and are amending to request an additional refund you should wait until the original refund is received before filing the amended return. Once filed, you can track the status of the amended return by going to www.irs.gov and going to the “Where’s My Amended Return?” link.
If you notice that you made a math error on your return or paper filed the return and forgot to attach all the proper tax forms you do not need to file an amended return. The IRS computers are very good at finding those errors and will automatically make those changes and notify you of any additional tax due or documentation needed.
So take a look at that corrected form and see if an amended return is needed. If so, get it done. It is always better to go to the IRS to correct problems before they come looking for you.
The answers in this column are meant to offer general information. You should consult your tax adviser regarding the specifics of your situation. Peter Robbins is a principal in the Boise office of CliftonLarsonAllen LLP, specializing in tax matters for small businesses, individuals, and trusts and estates. Have a question for Robbins? Email your question to email@example.com. Enter “Talking Tax” in the subject line.