Corrected form 1099

Today I received a corrected consolidated form 1099 from ETrade. The changes were

An increase of $2.46 in Interest Income.

A decrease of $7.35 in both Total Ordinary Dividends and Qualified Dividends.

An increase of $4.89 in Cash Liquidation Distributions.

Do the IRS and/or the state of California care about such minuscule changes? Must I, or should I, file amended returns? How should I handle this, what would you do?

Thanks.

Tom

Reply to
MrTom
Loading thread data ...

No, it doesn't matter. The cost of processing time to both you and IRS agents is not worth it. BTW, assuming the liquidation distribution is not taxable (ie. is just a return of your capital, or in other words the basis in the stock was more than $4.89), the effect of the above is to reduce your ordinary income by 7.35-2.46=4.89. It seems ETrade is re-characterizing dividends as interest and liquidation. For incomes under 100k, the taxable income is rounded to the nearest $50; for example, all taxable incomes 50000 to 50050 have a tax of 8930, so if your taxable income was 50040 before the amended

1099, your income after is less but yields the same tax. But if you dropped to the previous bracket, your tax would be 8918, and you would get $12 back. If your income is over 100k, you would get back about 0.28*4.89.

Now if you ever have to amend your return for other reasons, then be sure to include the reduction of $4.89, otherwise don't worry.

Reply to
removeps-groups

Thanks so much for confirming my thoughts on this.

Reply to
MrTom

Which begs the question, why does the financial institution bother, and do they bother sending these changes in to the IRS? Who is paying all the overhead costs for this, if it's not necessary?

-Mark Bole

Reply to
Mark Bole

They're required to get it correct. And they might have some customers with 1000 times the position, for whom it does matter. (And the largest part of the cost is the snailmail, sending lots of data to the IRS is cheap.)

Seth

Reply to
Seth

The financial institution does have a de minimis reporting requirement of anything under $10. But for corrections, there is no de minimis amount.

Reply to
Arthur Kamlet

I am not trying to be funny here, but why (or perhaps, how) do you say this? I've seen others in the NG state that even if one doesn't receive a 1099 for an interest payment from a FI below $10., one still needs to declare it as income. And in that case, I don't even think the IRS gets the reported income.

In this case, they DO receive the corrected data, right?

So, what you say may be true from a practical sense, can you cite anything that says you can forget about the amended return? Being a worry wart, short of seeing an official IRS statement, I sure would. And what if I were audited? Would some cryptic words like "Oh, I didn't report that? Something I read from an anonymous source on the internet said I didn't have to worry about correcting additional income" should wouldn't look good in my mind.

But again, I'm just an interested party to the discussion.

Reply to
Andrew

True. However, in the OP's case, it looks like the tax after applying the change is the same or less than before, depending on whether the $4.89 liquidation distribution is taxable or not (usually it is not taxable as it is a return of capital). So his tax would decrease -- best case by about $10, worst case by $0 (because of the rounding (eg. all income from 50000 to 50050 has the same tax).

I think so.

If you get a CP2501 letter, just write back with the facts and file an amended return. It's nothing to worry about really. But just my gut feeling is that you won't get a CP2501 even if your income did increase $10.

Reply to
removeps-groups

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.