Can I ignore a minor corrected 1099D?

My son did his own taxes for the first time this year. When he gets his own cell phone account he will be an adult! Etrade issued a corrected 1099D, moving $100 from qualified dividends to non-dividend distribution. I don't know how it affects his return, but it can't be more than $10. Amending a return isn't difficult but he doesn't know how, is 400 miles from me, and doesn't want to do it. Is the IRS going to care? If so, I will get on him to do it.

Reply to
Wade Lippman
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I assume you mean 1099-DIV.

The IRS won't care about such a small amount, especially since, if it makes any difference at all, it would be an additional refund to your son, not additional tax owed. If he's in a low tax bracket, he might not have paid any tax on the qualified dividends, and there's no tax on a non-dividend distribution, so it might not make any difference.

Bob Sandler

Reply to
Bob Sandler

Thinking about this more carefully -- Did the corrected 1099-DIV reduce only box 1b (qualified dividends) by $100, or did it also reduce box 1a (total ordinary dividends)?

If it reduced both boxes 1a and 1b (and added $100 to box 3) then what I said before is correct. It will either make no difference or produce a small additional refund.

If it reduced only box 1b, but box 1a is unchanged, it could result in a small amount of additional tax owed. But if the additional tax is only about $10 the IRS won't bother him about it. It's not necessary to amend for that.

Bob Sandler

Reply to
Bob Sandler

Qualified Dividends are taxed the same as long term Cap Gains. So, if his (taxable) income was less than $39,475, he paid zero on it anyway. If he is fortunate enough to have such a high starting salary, he paid $15. The non-dividend distribution is a return of capital, and wouldn't be taxed.

We're in a time when going through the forms all over to get back a potential $15 isn't an effort many would make. Especially for the fact that he only would have paid that if he's grossing over $50K.

On the other hand, knowledge is power, and I'd strongly encourage him to see the effect of that $100. Understanding one's tax return is part of "adulting" and part of being in touch with one's Personal Finances.

Reply to
JoeTaxpayer

It is both boxes. Sorry for not being clear. Thanks.

Reply to
Wade Lippman

That does bring up the interesting question of what IS the correct amount of extra tax owed that would make amending worth while? Years ago I did my daughter's taxes for her and realized after I filed that I had forgotten about a savings account she had where she had earned a couple hundred dollars interest. I decided not to amend because I assumed that if the IRS caught it, we would just pay the extra amount owed and any interest (she was probably in the lowest bracket at the time so it wouldn't have been much). As it turned out, the IRS never caught it (or decided it wasn't worth pursuing), so we just forgot about it and moved on.

But in general, where should the average taxpayer draw the line on this? If you only owe an extra $10 it's probably not worth it. If you owe several hundred, that's obviously different. But in between those amounts, what amount should cause the average taxpayer to amend the return? And in general, is there some amount where the IRS will think it's more than a simple mistake and actually an attempt to avoid taxes?

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Reply to
Rick

To add to all of the earlier responses, differences in reporting dividend income is something the IRS computers will pick up automatically when they match the return to the third party (broker) documents. If the difference is large enough to consider pursuing, the IRS will send a CP2000 notice proposing a change in tax liability. In all likelihood, the difference is small enough that the IRS will ignore it.

Ira Smilovitz, EA Leonia, NJ

Reply to
ira smilovitz

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