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Mark Anderson
Mark Anderson, Tax Attorney
Category: Tax
Satisfied Customers: 541
Experience:  Tax attorney and accountant
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W-2employee paid additional income 1099 not filed 1099 may

Customer Question

w-2employee paid additional income 1099 not filed 1099 may be filed for several years what is SOL period
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: filed taxes timely 1099 for years 2006-2014 has sol run
JA: Is there anything else the Accountant should be aware of?
Customer: no
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Submitted: 1 year ago.
Category: Tax
Expert:  Mark Anderson replied 1 year ago.

There is no SOL on failing to report income.

Expert:  Mark Anderson replied 1 year ago.

You should just amend your return:

Expert:  Mark Anderson replied 1 year ago.

if you knew the return was inaccurate when you filed it, you should amend it to make it accurate without delay. The IRS rarely brings up an originally filed return in civil audits or in criminal prosecutions once the taxpayer has come forward and attempted to correct it by filing an amended return. But to take advantage of this rule, you need to be proactive, and you need to make the correction before the IRS finds your error.

Example: You file your original return April 15 and state you aren’t subject to income taxes because they are unconstitutional and you are not a slave to the federal government. You had better file an amended tax return properly reporting your income and paying your tax before the IRS contacts you to tell you they disagree with your original return. (See “Ten Tax Protestor Claims To Avoid.”)

Recently the IRS issued Notice 989, stating that independent contractors recharacterized as employees “must” file amended tax returns. Yet it’s unclear that the IRS has the authority to change the “should” standard in its Regulations by a Notice, and in any case, this is only one setting in which the amended return dilemma can arise. For discussion, see “Ten Things IRS Wants Workers to Consider When Contractors Become Employees,” Vol. 9, No. 156, Daily Tax Report (Aug. 17, 2009), p. J-1.

No. 2: You can’t cherry-pick what you correct.

You don’t have to file an amended return, but if you do, you must correct everything. This is the IRS version of “in for a penny, in for a pound.” To use a different metaphor, you can’t cherry-pick and make only those corrections that get you money back, but not those that increase your tax liability.

Example: You file your original return and believe it to be accurate. Six months later, after you’ve already received the $3,600 refund you claimed, you discover you forgot to report a stock loss that would have netted you an additional $1,000 refund. You also discovered that you under-reported your earnings from a partnership, because you just received an amended Form K-1 saying that instead of the $50,000 of income you reported (from the first K-1), your share of the income was actually $150,000.

If you amend, you must correct both errors, not just the one in your favor. But you might be surprised to find you are not obligated to file an amended return, even though most tax advisers will tell you it’s a good idea–that’s because the IRS will probably send you a bill based on the revised Form K-1 the partnership sent you once its computers get around to matching that form against your Form 1040. (For more on computer matches, click here.)

Expert:  Mark Anderson replied 1 year ago.

Normally the IRS has three years to audit a tax return. (See “Even The IRS Has Time Limits.”) You might assume that filing an amended tax return would restart that three-year statute of limitations. Surprisingly, it doesn’t.

In fact, if your amended return shows an increase in tax, and you submit the amended return within 60 days before the three-year statue runs, the IRS has only 60 days after it receives the amended return to make an assessment. This narrow window can present planning opportunities. Some people amend a return right before the statute expires. Plus, note that an amended return that does not report a net increase in tax does not trigger any extension of the statue of limitations.

Example: You file your 2007 return on April 15, 2008, claiming a $2,100 refund, which you receive. On March 15, 2011, you file an amended 2007 return claiming additional deductions for charitable contributions and property taxes you forgot to claim on your original return, netting you another $6,000 refund. One month later, April 15, 2011, the IRS’ three-year statute of limitations expires. Because there was no increase in tax shown on your amended return, the IRS doesn’t get more time.