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08-09-2017 04:17 PM
I am helping my daughter out with her return. She only now in August received a new 1099-misc for 2016. Prior to this, she was unable to get the Payer's Federal ID number and so there was no way to actually report the income in the return back in April.
My questions are as follows:
1) Was there a way using H&R Block At Home to properly report this income without any of the payer's information in the first place. I would like to know for future reference.
2) Can the amended return be e-filed?
3) Can she avoid any penalties for this extra income due to the fault being with the payer? Is there any way to do this electronically, or should she do it all in the mail?
4) Similar questions with the California state return? We have the program for that as well.
5) The 1099-Misc is reporting more money than she received in the first place. How does she report the correct amount?
Solved! Go to Solution.
08-09-2017 05:26 PM
Welcome to the H&R Block community.
Let's answer your questions in the order you asked them as I think that will kind of simplify this whole thing for you.
(1) Yes. You can report 1099-MISC income directly on Schedule C without the 1099-MISC if you do not receive the form or if you do not receive the form in time. If you are off by a few dollars that's okay, however you can (and should) amend the tax return later on when you get the 1099-MISC to reflect the exact dollar amount. If you know how much you made though then you won't have any major issues with reporting directly on the Schedule C.
(2) No. Amended returns must be mailed to the IRS. You can however complete your amendments using the H&R Block software or by printing the necessary forms from the IRS and California state websites. The form you need for the federal tax return is Form 1040X (Amended Tax Return). You will also need a Schedule C and a Schedule SE.
(3) Before we get to the question of how to avoid the penalties let's see what your daughter's tax liability is. If she ends up not owing any tax then she will not owe a penalty. Tax liability is determined based on the overall outcome of the tax return, not just on the 1099-MISC. However, if she does owe a penalty then there may be a way to avoid it depending on what type of penalty it is. The penalty for underpayment of tax can be avoided if either (1) your daughter did not owe any tax for 2015, or (2) 90% of her tax liability for 2016 was covered by withholdings & tax credits on her 2016 return. The penalties for filing late & paying late can both be waived, according to the IRS, if you can show reasonable cause for failing to file and/or pay so you should be able to get around paying any penalties of that type. Also, I take it that your daughter's tax return was filed on time but it was just the 1099-MISC that wasn't included, so based on that there wouldn't be any penalty for filing late (the late filing penalty is the steeper of the two late penalties so if I'm right that she filed a return for 2016 although the 1099-MISC was missing then that's a good thing that she did so). Always file if you know or even suspect that you're going to owe tax, even if you're missing something or can't pay right away.
(4) California can be amended in much the same way as the federal return, although I will have to look and see which forms you need for that one. I'll also see what I can find on the state penalties (if any) so that hopefully I'll be able to help you avoid those.
(5) Did your daughter have expenses for work that she used some of the income to cover or did they simply report more than she actually earned?
Once I hear back from you on the last question I'll be able to provide you with some additional information on that one.
Senior Tax Advisor (Tampa, FL)
08-09-2017 06:29 PM
Thanks for your answers.
1) We'll keep that in mind for next year if that happens again.
3) I think she had a refund on the originally filed return, but now she will owe the money from the change in income (about another $1000 I believe). So, you think that the interest on the additional income and social security taxes may be able to be waived?
5) I can't remember her explanation about the 1099 and will have to get that from her. But it could be that some of the money was used to pay expenses on the job, in which case, presumably she can deduct that on the return.
08-09-2017 07:02 PM
You're quite welcome.
(3) It's possible, and I believe you can make a good case since you didn't receive the 1099-MISC and didn't know about the Schedule C. Between the two you wouldn't have reasonably been able to file in time.
(5) Correct. Expenses that your daughter paid for work that she was not reimbursed for are deductible directly from the 1099-MISC income on Schedule C. She will only be taxed on the NET amount (income after expenses) so the taxes may not be as much as you think. Basically she will be assessed 15.3% in FICA taxes plus the federal income tax on the net amount, but the refund she initially had and any other deductions and credits that can still be taken will help lower the income tax. Excess withholdings from other jobs and refundable credits will help lower the FICA tax. She will get a deduction on page 1 of the 1040 for 1/2 of the self-employment (FICA) taxes as well.
08-09-2017 07:19 PM
I got the answer about the incorrect amount on the 1099. Apparently it is a double accounting. The extra amount was paid through another company and was on another W-2 or 1099. So, somehow we need to explain that if we can't get a corrected 1099.
08-09-2017 08:14 PM
I tried out the 2016 program for doing the amended return and it was fairly straightforward. It looks like the state program also works nicely as well. I should be able print out the forms to pdf and send them to my daughter to file away.
We just need to figure out how to handle the incorrect amount on the late 1099-Misc. We can put in the correct amount, but I presume we also need to send a letter of explanation of why that is correct and the currently filed amount is not. Or should we wait until there is a correctly filed 1099-Misc.
08-09-2017 09:04 PM
There is a way to get around the issue with the 1099-MISC. First you should try to get a corrected 1099-MISC.
If you cannot get a corrected 1099-MISC then the alternative is to report the income correctly on Schedule C without the 1099-MISC, but still send the 1099-MISC form you received and a letter of explanation, including the fact that you made an effort to obtain a corrected 1099-MISC, to the IRS along with the return. You'll be ahead of the game if you've already provided the IRS with a correct tax return and an explanation before they have the opportunity to review their copy of the 1099-MISC and notice the difference in the income amount and ask questions.
Yes the software will make both amendments easy. I'm glad to hear that's it's working well for you.