I just realized I forgot to include an income source on my recent tax filing. While not huge it is not insignificant either.
How much trouble am I likely in? Since it is not too long since filing will they be decent about it and just let me make the corrections and go from there or am I in for fines?
Should I preemptively approach the IRS (feds and state) or let them contact me? If I do approach them first is it better than having them figure it out or is it the same trouble either way?
I am not out to defraud the government. I have always paid my taxes and am nowhere near wealthy enough to get into gray tax evasion areas. But I am not real keen on offering myself up for IRS punishment either. Part of me hopes they just will not notice but that is not s smart move I am guessing.
You should be able to file a 1040X (amended return), pay any difference, and all should be well.
My understanding is they’re quite nice when people fix their own goofs voluntarily.
Of course, don’t trust me on this. I’m not an accountant, enrolled agent or tax preparer, and that’s who you’d need to talk to if you don’t want to talk to an IRS agent directly.
If you owe additional income, you may be subject to penalties for late filing and payment, but the penalties will be much smaller now than if this comes up several years from now.
If that income source was memorialized in a W-2 or a 1099, then the IRS likely already knows about it. Then the question is just whether anyone there takes a close enough look at your return to connect the dots.
This happened to me a couple years ago. My bank waited till July to send me the 1099’s for some saving bonds I had cashed the previous year. I filed a 1040X (you also need to include the updated 1040 forms too) and included a check for the $17 extra I received on my refund earlier. The check cleared a few months later and I never heard from the IRS again. The only problem was the when I filed the following year, I used my the adjusted gross income from my amended return, not the original and the IRS would not accept my E-filed return. I had to file a paper return instead.
1040X. No Big Deal. They get >500,000 of those every year. Quit stressing; this is completely routine. If you used Turbotax, it even has a built-in 1040X capability.