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I just received a corrected 1099 for 2012! It changed approximately $43 of Covanta Holding (CVA) distributions from return of capital to qualified dividend. This means I owe about $6 more in taxes. Is there any limitation on how late a corrected 1099 can be issued? Aren't companies and brokers supposed to report this information in a timely manner? Since it is obviously well past the April 15 deadline; what are the rules on when I need to file an amended return and how do I avoid penalties? Thanks.

Jeff
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I just received a corrected 1099 for 2012!

Congratulations! That's the latest one I've heard of.

It changed approximately $43 of Covanta Holding (CVA) distributions from return of capital to qualified dividend. This means I owe about $6 more in taxes. Is there any limitation on how late a corrected 1099 can be issued?

Evidently not. There's bound to be a date beyond which the IRS doesn't care, but I have no idea what date that is.

Aren't companies and brokers supposed to report this information in a timely manner?

Yes. There's even a penalty imposed on them if they don't. I also hear there are unicorn races this weekend.

Since it is obviously well past the April 15 deadline; what are the rules on when I need to file an amended return and how do I avoid penalties?

There's no specified time period after you become aware of the error, but there's no need to let it go on forever. There will be no penalty. Just pay the balance due when you file. They may or may not bill you for the interest. Probably not at this amount.

Actually, today I probably wouldn't even bother amending. It will cost them close to, if not more than what you owe to process the thing. Unless you work for the IRS, where I saw people disciplined for overlooking a 1099 that didn't even change the amount of tax, I wouldn't bother. Don't worry just because you're nominated to be Secretary of the Treasury. Important people don't have to follow the same rules as the drones.

Phil
Rule Your Retirement Home Fool
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Is there any limitation on how late a corrected 1099 can be issued?

Nope.

Aren't companies and brokers supposed to report this information in a timely manner?

Yes. But don't blame your broker on this one. The difference between return of capital and qualified dividends is something that has to come from the company. If the company has retained earnings, they can pay qualified dividends. If the company's retained earnings is zero or negative, payments must be return of capital and not dividends.

So I'd lay the fault for this correction on the company, not the broker.

Side note - If a company can't tell whether they have retained earnings or not within 90 days of year end, there's a problem with their management. And if there's a problem with management, that's not a company I want to own.

Since it is obviously well past the April 15 deadline; what are the rules on when I need to file an amended return and how do I avoid penalties?

The penalty for late payment is 0.5% of the tax due per month late, with a maximum of 25% of the late tax. On $6, your maximum penalty is $1.50. The IRS has discretion to waive penalties, which they would probably do for you in this case.

There's also interest, which is currently at 3% annually. At roughly 6 months late, the interest on your $6 of tax would be about a dime, give or take a penny or two.

Frankly, I wouldn't bother. The IRS generally will ignore balances below $5, and I've heard rumors the threshold is closer to $10.

--Peter
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The penalty for late payment is 0.5% of the tax due per month late, with a maximum of 25% of the late tax.

That's true for late payment of tax shown on the return, running from the original due date.

However, here we're talking about an amended return. Lat payment penalty on that type of assessment (audits also) doesn't start running until 20(?) days after it's assessed. If you pay the additional tax with the amended return there will be no penalty.

Phil
Rule Your Retirement Home Fool
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