I Received an Amended 1099 Form. How Does This Affect My Tax Return?

Taxes are due this year on April 15. But maybe you decided to file your tax return early so your refund could hit your bank account sooner. That may have been more than feasible if you had all of your tax forms on hand.

But what if it's been a few weeks since your taxes were submitted when you're notified of an amended 1099 form? Your first inclination may be to ignore it. But that's not the right decision at all.

You need to address an amended 1099 form

You may get a 1099 form for different reasons. A 1099 form issued by your bank will usually summarize the interest income you earned the previous year, while a 1099 form from a company you worked for will summarize your freelance income.

Each time a 1099 form is issued, you get a copy, but so does the IRS. So it's important to report any income listed on a 1099. If you don't, the IRS is apt to find out about it, and you don't want to risk being penalized for failing to report income.

Similarly, if you receive an amended 1099 form, the IRS is going to receive a copy as well. It's important to update your tax return to reflect the information your amended 1099 form contains. You can do so by filing Form 1040-X, which is an Amended U.S. Individual Income Tax Return.

Now, you might think, "Well hmph, that's not fair. I already did the work to submit my tax return. Why should I have to do more work?" And you're right. It is sort of unfair that an error on someone else's part is causing you added work.

But if you don't amend your tax return, you may end up with underreported income. And that could result in penalties if you pay the wrong amount. What's more, an amended 1099 might result in a larger tax refund for you. So failing to amend your tax return could mean denying yourself money you're owed.

You may not want to file your taxes too early

Tax filers are often encouraged to submit their returns as early in the season as they can, but there's a downside to doing that. The earlier you file your taxes, the more likely you are to complete that task before amended 1099 forms are issued.

As such, going forward, it could be a good idea to wait until March to file your taxes. Companies are required to submit 1099 forms by Jan. 31. But if you wait another four to six weeks to submit your return, you're giving yourself that much more time to see if any amended 1099 forms roll in. That could spare you the hassle of having to amend your tax return.

Plus, you might receive a 1099 form with information that doesn't look right to you. If so, it pays to contact the issuer to follow up. But in that case, it might take the issuer a few weeks to issue you a corrected form.

So all told, while it's a good thing to file your taxes early, filing too early could come back to bite you. You obviously can't undo an early filing you already made this year. But consider adjusting your strategy for future tax years to avoid the work involved in amending a tax return.