When you file taxes, you may have to report income from a 1099 form or several. The IRS uses 1099 forms for interest income, dividend income and self-employment income. There are 1099 forms for pension pay-outs, real estate and broker transactions too. In the flurry of tax time, you might just forget to report an amount on a 1099. Fortunately, you can correct your mistake without much effort or penalty.
File an Amended Return
The IRS allows you to file an amended tax return, form 1040X, up to three years after the date of the original tax return. If you paid tax late, you have the later of three years from the original return or two years after the date of payment to file a 1040X. Form 1040X must be sent to the IRS through the mail. You cannot file it electronically. Use the form to report income from a 1099 that you missed on the original return. If adding the 1099 affects a schedule, such as Schedule C, used for business income, you have to include a new copy of the schedule too.
Handling Tax Owed
Reporting income you missed originally may add to the amount of tax you owe. If that is the case, send the additional payment to the IRS. If you pay the additional amount by the tax due date, you will not owe any interest or penalties. For example, if you originally filed on March 15, realize you omitted a 1099 on April 1 and send in the 1040X by April 15, you won't owe extra. If you pay late, you will owe interest and a possible penalty.
If you are owed a refund from your original tax return, the IRS wants you to wait to file an amended return until you receive the refund. The amended return does not impact your original refund. In the case that adding a 1099 increases your refund, the IRS will send you the extra amount. If the 1099 reduces your refund amount, you will need to send the IRS the difference.
Make sure you do not miss a 1099 in the future by keeping track of all the income you receive. If you are self-employed, keep track of all income, as businesses do not need to send you a 1099 if you earn less than $600 from them. You still need to pay taxes on the amount less than $600, though. Keep a notebook or spreadsheet throughout the year and add the income as you receive it. Keep track of interest, dividend or any other income for which you are likely to receive a 1099.