Taxpayer includes income on tax return - after filing tax return - receives 1099-Misc

[duanecpa]

Taxpayer reports all income on 2016 tax return. After the tax return has been filed, taxpayer receives a 1099-Misc for income tax has already been included on the tax return.

Since the 2016 1099-Misc was not included in the originally filed tax return but the income was, what should the taxpayer do at this point?

Thank you.

[Rapid Robert]

Since the 2016 1099-Misc was not included in the originally filed tax return but the income was, what should the taxpayer do at this point?

What are you talking about? Why would anyone go out of their way to "include" a 1099-MISC with a return, unless there was withholding? Anyway, it doesn't matter whether you "included" it or not, no need to do anything.

[TAXNJ]

Never seen a 1099- Misc. that says “File with Federal return”. Before e-filing return, if you can/want, though not necessary, enter the 1099- Misc. info (if your tax software has a worksheet for such) otherwise if the $ amount of the 1099-Misc. has already been included on the tax return – no need do anything at this point (as Reply Poster – Rapid states) except keep the 1099- Misc. with copy of the return,

[Uncle]

Wait for CP2000

Taxpayer reports all income on 2016 tax return. After the tax return has been filed, taxpayer receives a 1099-Misc for income tax has already been included on the tax return.

Since the 2016 1099-Misc was not included in the originally filed tax return but the income was, what should the taxpayer do at this point?

Thank you.

Nothing for now. My experience is that a CP2000 notice will eventually arrive, increasing income by the amount on the 1099-Misc. At that point I file a 1040X, including the 1099-Misc income and subtracting the original amount. This has always solved the problem for my clients.

Christopher Mewhort, EA

[S T]

Guess the question would be
did you paper file or electronically file

Neither requires the 1099 Misc to be attached, although, on some software programs you can enter a 1099 Misc with all of the identifying numbers for electronic filing to flow to the appropriate line item or schedule . Paper file does not require the 1099 Misc to be attached

As long as you reported the correct income from the 1099 Misc on the original filed return - keep a copy in your document file for future reference with notes,

It would seem not much more needs to be done on the return

Sandy

[TAXNJ]

Nothing for now. My experience is that a CP2000 notice will eventually arrive, increasing income by the amount on the 1099-Misc. At that point I file a 1040X, including the 1099-Misc income and subtracting the original amount. This has always solved the problem for my clients.

Christopher Mewhort, EA

Interesting. What is the explanation for the decrease and increase on the amended return?

In the rare case of receiving a notice, a letter explaining the amount(s) was included in the original return was not a problem.

[FEDUKE404]

A few missing pieces here

Nowhere have I seen any mention of the (approximate) amount of the income nor the type of income, specifically which box of Form 1099-MISC contained the income.

Merely "including the income on the tax return" does not necessarily resolve all potential problems. The most obvious would be a Schedule C / Schedule SE scenario.

Also, most tax software now has a comprehensive worksheet for the inclusion of "leftover" income that goes on line 21 of Form 1040. In the absence of filling in the (unavailable at the time) Form 1099-MISC information, if that line was used. . .what did you call the income ?

And, as others have noted, there is a discernible risk that the IRS matching program might pick up on something specific to the Form 1099-MISC, again mainly dependent upon the answer to my first question above.

FE

[TAXNJ]

Nowhere have I seen any mention of the (approximate) amount of the income nor the type of income, specifically which box of Form 1099-MISC contained the income.

Merely "including the income on the tax return" does not necessarily resolve all potential problems. The most obvious would be a Schedule C / Schedule SE scenario.

Also, most tax software now has a comprehensive worksheet for the inclusion of "leftover" income that goes on line 21 of Form 1040. In the absence of filling in the (unavailable at the time) Form 1099-MISC information, if that line was used. . .what did you call the income ?

And, as others have noted, there is a discernible risk that the IRS matching program might pick up on something specific to the Form 1099-MISC, again mainly dependent upon the answer to my first question above.

FE

Trying to understand your reply post but have no idea what you just tried to convey.

Reporting 1099-Misc amounts on the appropriate form(s) as reply poster S T states is correct or incorrect? Correct. No?

[FEDUKE404]

Huh ??

Trying to understand your reply post but have no idea what you just tried to convey.

Reporting 1099-Misc amounts on the appropriate form(s) as reply poster S T states is correct or incorrect? Correct. No?

I'll speak S-L-O-W-L-Y . . .

If you (ahem!) "assume" the Form 1099-MISC income was reported correctly, ***NOT*** merely "included," then there are likely no changes necessary to the filed return.

OTOH (that means "on the other hand") if the information actually shown on the newly-arrived Form 1099-MISC would then place the income on a line of the Form 1040 that differs from wherever the original poster placed it, that could present a problem. Consider a valid "other income" entry that would go to line 21 of Form 1040 versus income that would have to go to a Schedule C and thus have a Schedule SE tax calculated. Or vice versa. (You can Google that.)

Unless you have magic powers, the only FACT we have learned from duanecpa is that the income was "included." That does not necessarily lead to a more definitive conclusion, with newly-arrived Form 1099-MISC in hand, that same income was properly reported on the income in a manner consistent with the Form 1099-MISC information. You may wish, as a starting point, to review the differences between "income" reported in Box 3 versus Box 7 of Form 1099-MISC.

So there are two options: #1 - return is correct and needs no changes or #2 - return is incorrect and changes are needed. At this stage, only duanecpa knows the answer.

FE

[Bonnie]

I've had situation in past where the correct amount was included in income on Sch C but I did not enter the income as a 1099 in the program (E-filed return). The taxpayer received the CP2000 and I just wrote a letter of explanation and all turned out fine. No need at that point to do a 1040X. The IRS had already taken care of that. We just explained what happened and taxpayer owed nothing. I think this was first year I could enter a 1099 in my tax program and I didn't realize I could. Leaned that lesson and since have always entered as a 1099. So do nothing now and address it when the taxpayer hears from the IRS if they do.

[TAXNJ]

Think it is C-L-E-A-R-E-R vs

I'll speak S-L-O-W-L-Y . . .FE

Your explanation of “OTOH (that means "on the other hand")” – not up to speed on this new slang acronym language but let me try, TY (means “thank you” I think).

Understand & agree when you say:

....“ if the information actually shown on the newly-arrived Form 1099-MISC would then place the income on a line of the Form 1040 that differs from wherever the original poster placed it, that could present a problem."

and as you further say

So there are two options: #1 - return is correct and needs no changes or #2 - return is incorrect and changes are needed. “

Most important is that the question was directed to the Original Poster and as you say “At this stage, only duanecpa knows the answer.”

Thanks for trying in making it clearer.

[Rapid Robert]

I've had situation in past where the correct amount was included in income on Sch C but I did not enter the income as a 1099 in the program (E-filed return).

I think this was first year I could enter a 1099 in my tax program and I didn't realize I could. Leaned that lesson and since have always entered as a 1099. So do nothing now and address it when the taxpayer hears from the IRS if they do.

It seems some are assuming that just because their software has a 1099-MISC facsimile data entry screen means the data is being sent with the efile. Only W-2 and 1099-R (with withholding) info is normally included with the efile (I'm not going to say "never anything else", but I'm 99% sure, unfortunately IRS does not make MeF schema files as easily available as in the past).

Recall that the Form 1099-K now serves roughly the same function as 1099-MISC box 7. How many softwares have facsimile entry screens for 1099-K? Very few, I imagine. Yet the IRS CP2000 computer software is going to look at 1099-K info also.

The simplest assumption is that IRS Cp2000 rules look for total gross receipts under a given Tax ID to be equal to or greater than total amounts reported on 1099-MISC, just like 1099-B, 1099-S, 1098, etc. They do not do precise form-by-form matching like they do for 1099-R and W-2.

If someone got a 1099-MISC under-reporting notice, it could be evidence of some other CP2000 rules we won't know about. Or maybe there was an error in tax ID with the Schedule C, or some other reason why gross receipts were less than total of 1099-MISC.

As for the "more facts" side issue, I think the assumption is that when someone says, "1099-MISC" without specifying a box, they mean Box 7.

[TAXNJ]

It seems some are assuming that just because their software has a 1099-MISC facsimile data entry screen means the data is being sent with the efile. Only W-2 and 1099-R (with withholding) info is normally included with the efile (I'm not going to say "never anything else", but I'm 99% sure, unfortunately IRS does not make MeF schema files as easily available as in the past).

Recall that the Form 1099-K now serves roughly the same function as 1099-MISC box 7. How many softwares have facsimile entry screens for 1099-K? Very few, I imagine. Yet the IRS CP2000 computer software is going to look at 1099-K info also.

The simplest assumption is that IRS Cp2000 rules look for total gross receipts under a given Tax ID to be equal to or greater than total amounts reported on 1099-MISC, just like 1099-B, 1099-S, 1098, etc. They do not do precise form-by-form matching like they do for 1099-R and W-2.

If someone got a 1099-MISC under-reporting notice, it could be evidence of some other CP2000 rules we won't know about. Or maybe there was an error in tax ID with the Schedule C, or some other reason why gross receipts were less than total of 1099-MISC.

As for the "more facts" side issue, I think the assumption is that when someone says, "1099-MISC" without specifying a box, they mean Box 7.

Rapid, Good points - makes sense, but wish we knew the IRS selection process for notices, etc.