2005 Question?

[David1980]

I still find it hard to believe the IRS said you cannot amend a 2005 income tax return.

Basic Tax Prep 101 asserts you have three years from the last allowable filing date of the relevant tax return. Ignoring any extension issues, for a 2005 return due by 04/15/2006 that automatically carries you to April 15, 2009 which I don't think has arrived yet!

FE

I don't find it that hard to believe. Like everyone, they get a "bad apple" time to time who either doesn't care about finding the correct information or doesn't care to find it for you.

After all if something the IRS tells you comes into audit for being incorrect you got what you paid for.

[FEDUKE404]

IRS was wrong?

I still find it hard to believe the IRS said you cannot amend a 2005 income tax return.

Basic Tax Prep 101 asserts you have three years from the last allowable filing date of the relevant tax return. Ignoring any extension issues, for a 2005 return due by 04/15/2006 that automatically carries you to April 15, 2009 which I don't think has arrived yet!

FE

[SueBaby]

I'm probably not responding correctly to what's been said, but here's what I "think" I would do.

It doesn't matter what the IRS agent said - I'd tell the client the $14,000 should be reported in the year received. Amended doesn't come into it at all. She didn't file and should file in that year.Leave it up to the client but the next step will make filing 2005 very important.

Then deal with 2006. If the IRS doesn't have the 1099 it doesn't matter if the guy put 2006 on it. If the 2006 return is correct the way it stands leave it alone. If you think the 1099 will be sent to the IRS with 2006 on it, then you could amend filing it in and out stating briefly that the $14000 was reported for 2005. Or if the return is correct the way it is you can wait for the IRS letter and explain at that time the money was reported correctly in 2005.
Your only other choice is to ignore that money which shouldn't be done. If the client filed 2006 and doesn't want to file 2005 that is up to them. But since they told you the money came in 2005 you can't file 2005 without it.

That is what I did filed the $14,000 in 05. If letter I will deal with it whenever. Thanks for all the input on this matter; it has been a hair pulling situation and like pulling teeth out with your fingers with some people and with their problems; Thanks again!

[JG EA]

I'm probably not responding correctly to what's been said, but here's what I "think" I would do.

It doesn't matter what the IRS agent said - I'd tell the client the $14,000 should be reported in the year received. Amended doesn't come into it at all. She didn't file and should file in that year.Leave it up to the client but the next step will make filing 2005 very important.

Then deal with 2006. If the IRS doesn't have the 1099 it doesn't matter if the guy put 2006 on it. If the 2006 return is correct the way it stands leave it alone. If you think the 1099 will be sent to the IRS with 2006 on it, then you could amend filing it in and out stating briefly that the $14000 was reported for 2005. Or if the return is correct the way it is you can wait for the IRS letter and explain at that time the money was reported correctly in 2005.


Your only other choice is to ignore that money which shouldn't be done. If the client filed 2006 and doesn't want to file 2005 that is up to them. But since they told you the money came in 2005 you can't file 2005 without it.

[SueBaby]

I'm not sure I agree with that statement: 2005 was due 04/15/2006, add three years and you get 04/15/2009 (at least for amending returns, not sure for "originals" but I think the same).

This tax return, the client, and the employer sound like complete basket cases.

Late filing penalties (is it 25% + interest?) might get their attention, even after the aforementioned 15.3% self-employment tax on the Form 1099-MISC income. (I'm sure they have excellent 2005 expense records for you....)

I am SO glad I limit my practice to recommends/word-of-mouth only. Aside from the aggravation, you really have no idea of where "the truth" actually lies here.

Once again....cash up front....and good luck!

FE

Yes, the IRS told me right out April 15 of this year 05 is up not to be amended; which it would have been alot easier for me to amend the thing. And yes, it is all a basket case and I got paid and they are to mail it. I am out of it and hope not to hear from them again plus her weird boss!

It is one of those clients I collected from the tax preparer that died and others from the one that retired. Not only all the clients I have now but their problems along with it. And I have had some whoppers this year.

Thanks to you all I keep my sanity and of course learned alot from all of you. To bad can't see all to buy you lunch. THANKS!!

[FEDUKE404]

Not too late?

...but the IRS said 05 is too late to amend 3 years is up...

I'm not sure I agree with that statement: 2005 was due 04/15/2006, add three years and you get 04/15/2009 (at least for amending returns, not sure for "originals" but I think the same).

This tax return, the client, and the employer sound like complete basket cases.

Late filing penalties (is it 25% + interest?) might get their attention, even after the aforementioned 15.3% self-employment tax on the Form 1099-MISC income. (I'm sure they have excellent 2005 expense records for you....)

I am SO glad I limit my practice to recommends/word-of-mouth only. Aside from the aggravation, you really have no idea of where "the truth" actually lies here.

Once again....cash up front....and good luck!

FE

[Snaggletooth]

Misconceptions

This entire scenario amazes me. Your client just "forgot" about $14,000 in income????

This may or may not be innocent in the minds of those involved. There is a mistaken perception that if a payer does not turn in the numbers, that the recipient doesn't have to report it. That is probably why Sue's client asked her to talk to the payer.

This misconception has its roots in overwhelming numbers of people who may know better but to whom there is no compunction to report if they "don't have to." This maxim is so widespread that it becomes public venacular.

Sue, your client does have an option to avoid $1000+ in self-employment taxes by claiming the $14,000 as wages, and paying the employee's half of social security. That means the payer who doesn't want to fool with it will be likely be held accountable.

[SueBaby]

This entire scenario amazes me. Your client just "forgot" about $14,000 in income????

And then there's: "The employer did not report the 1099 nor does he want to either. He said it was years ago and he did not want to be bothered with it."

The client will get a surprise with back taxes, penalty/interest, and don't forget the likely >$2k self-employment tax.

The employer might get his bell rung also when the Soc Sec/FUTA/SUTA folks start asking if your client was perhaps an employee.

I would amend 2005 and collect my own fees up front very quickly.

FE

She did NOT DO 05 at all. They moved then and did not file or forgot. All I know it is a messed up story and I feel like I am in the middle trying to do what is right.
The 1099 is on a 06 form and the 'Boss' is something to talk to, and yes he did not send anything off; plus I just want it over and done with.

This situation is a nightmare; which I have had quite a few this year. If it was messed up I would amend it; but the IRS said 05 is too late to amend 3 years is up. So my deal is for them to send it off , pay the taxes and hope for the best.

If anyone else has a better solution let me know --besides to retire!

[FEDUKE404]

Jaw-dropping

This entire scenario amazes me. Your client just "forgot" about $14,000 in income????

And then there's: "The employer did not report the 1099 nor does he want to either. He said it was years ago and he did not want to be bothered with it."

The client will get a surprise with back taxes, penalty/interest, and don't forget the likely >$2k self-employment tax.

The employer might get his bell rung also when the Soc Sec/FUTA/SUTA folks start asking if your client was perhaps an employee.

I would amend 2005 and collect my own fees up front very quickly.

FE

[SueBaby]

Sue, you're getting bits and pieces of information from every perspective because you did not tell us who your client was. Someone asked you this earlier, and you did not respond except with more information which did not define an answer. Is your client the payer of the $14,000 or is it your recipient?

The reason this is a such a problem is because it appears to us you are somehow being placed in a position to respond to the needs of both the issuer and recipient. Your responsibility to either party is drastically different.

My client is a recipent of the $14,000. She did not know what to do so she wanted me to call her boss and she if I could 'straighten' things out. Time has passed so long he did not want to do nothing about it. Found out he did not send anything to the IRS.
So my suggestion in this is to just file it and for her to mail and pay the taxes and let it go . There is nothing more I can do. Unless someone else can suggest otherwise.

I have the same problem with another client as a payer and did not send the 1099s in and we go to an audit next month because of it.

[Snaggletooth]

Who Is Your Client

Sue, you're getting bits and pieces of information from every perspective because you did not tell us who your client was. Someone asked you this earlier, and you did not respond except with more information which did not define an answer. Is your client the payer of the $14,000 or is it your recipient?

The reason this is a such a problem is because it appears to us you are somehow being placed in a position to respond to the needs of both the issuer and recipient. Your responsibility to either party is drastically different.

[SueBaby]

Here is what you need to do since you have been apprised of the facts of the case. Whether or not the employer ever reported it to the IRS is immaterial. The IRS will NOT come back and ask where the 1099 is. If they do, it is the employer's problem, not anyone elses. The taxpayer is still required to report the income and in the proper year it was earned. The fact that the employer did not report it and gave it to her on a 2006 form is actually a good thing. You don't have to straighten that out with the IRS. Prepare the return (paper) or file an amended return for 2005 if they previously filed, and give it to them. You have done your duty. Leave it up to them to mail it in and pay the tax due. They can duke it out. You're done, in compliance, and it is not your problem any more.

Thanks to all of you. It has made it easier in what to do. At least on my part.

[Burke]

Here is what you need to do since you have been apprised of the facts of the case. Whether or not the employer ever reported it to the IRS is immaterial. The IRS will NOT come back and ask where the 1099 is. If they do, it is the employer's problem, not anyone elses. The taxpayer is still required to report the income and in the proper year it was earned. The fact that the employer gave it to her on a 2006 form and did not report it is actually a good thing. You don't have to straighten that out with the IRS. Prepare the 1040 return (paper) or file an amended 1040X return for 2005 if they previously filed, and give it to them. You have done your duty. Leave it up to them to mail it in and pay the tax due. They can duke it out. You're done, in compliance, and it is not your problem any more.

[JoshinNC]

You CANNOT send the 1099/1096 in

on behalf of the employer because you don't have the employer's authority to do so. Your client MUST report the income they recieved in 2005 IRREGARDLESS of whether the 1099 was sent in or not. In the event that they were audited for 2005 the first thing the auditor will do is a bank analysis and then your client must explain why there are deposits that don't match the reported income.

Tell the husband that either they report the income correctly for 2005 or they are no longer your clients, period.

The fact that it is on a 2006 1099 is irrelevant because, as you said, the IRS doesn't have it anyway. It should never be an issue, but if so, hey, you just got a bonus in the way of more fees to write a couple of letters to get it all fixed and you look like the hero.

[SueBaby]

Your post is rather confusing to me.

Are your clients the employee's/subcontractors or the employer? If they are the they are emplyee's/subcontractors you do not file the 1099's and 1096, the employer is responsible for that. Your client needs to report the income whether or not they/and or the IRS received 1099's/1096.

If they are the employer then they should file the 1099/1096 which you can get from the IRS.

In any case it is not the source documents that determines the reporting of income.

The employer did not report the 1099 nor does he want to either. He said it was years ago and he did not want to be bothered with it. I was going to send it anyway but know later on they will get a letter stating where was the 1099 for that income,. That is the problem I have with another client the tax preparer nor the employer sent theirs off either and it is an audit next month.