Question: After I filed my taxes, I received a 1099. It's for a little less than $2,000. Can I let it go until next year?

A BuyandHolder

Answer:

Dear BuyandHolder,

No...you cannot simply ignore this income until the next tax season. The IRS receives copies of all 1099s; your return must include information that matches each 1099, otherwise you'll be required to pay taxes on the amount of income earned plus a tax penalty.

The IRS 1099 Series

There are a number of 1099s, the 6 most common being:

1099-B (B stands for Broker as well as Barter; this 1099 reports proceeds from brokerage firm transactions and barter exchanges)

1099-DIV (Dividend and Distribution income)

1099-G (Government payments)

1099-INT (Interest income)

1099-MISC (Miscellaneous Income)

1099-R (Distributions from annuities, IRAs, pensions, profit sharing plans, insurance contracts and the like)

Filing an Amendment

You need to file an amendment. It's fairly easy to handle.

First, you'll need a copy of your original tax return along with IRS Form 1040X (download the 1040X at: www.irs.gov). The form has three columns. In column one, simply copy the numbers you put in your original tax return. In the second column note any changes you need to make. Then in the third and last column, tally up the corrected dollar amount.

The Form 1040X cannot be filed electronically - even if you filed your original return electronically. And, if per chance you will be receiving a refund, you will receive it the old-fashioned way, by check from the IRS. No electronic deposit into your bank account. It could take as long as 12 weeks to arrive.

Don't File Too Soon

Before doing an amended return, wait three weeks after you electronically filed your original return. Or, wait eight weeks after filing an original paper return. Why, you ask? This gives the IRS time to process your original return and avoid any confusion about the amended return.

Reasons to File an Amended Return

• You forgot to claim a deduction or credit
  
  
• You forgot about the one-time telephone excise tax return, which ranges from $30 to $60.
  
  
• You forgot to report some of your capital gains, interest income or income from stock dividends, bank CDs, savings accounts. (This is your situation.)
  
  
• You are entitled to deductions that went into effect after the paper tax returns were mailed to taxpayers in January. In other words, Congress approved several deductions after the 2006 forms were sent to the printer. These were:
  
  
  • a deduction (up to $4,000) for college tuition and fees
  • a deduction ($250) for teachers, principals and professors who spent their personal money on classroom supplies
  • a deduction for some state and local sales taxes.

Once you have filled out your 1040X, make a copy of it for your files.

Good luck!