In early 2019, I thought all of my tax documents had arrived in the mail, so I sat down to file my taxes in early March. Everything looked great, so I submitted my return to the IRS and went on about my merry business.
In early April, however, an unexpected document popped up in the mail. It was a Form 1099 for a very small amount of freelance work I had done the previous year -- and forgotten about. For whatever reason, the document hadn't been sent to me until fairly close to that year's tax deadline.
This was a stressful situation, to be sure. Would I be hit with any fees or interest charges? What documents would I need to file? Should I just "pretend" I didn't see it? (Quick answer to that last one: No.)
Here's what you need to know about these situations.
Most people receive all of their tax documents by early February and move on to file their income taxes with the IRS before the deadline (in 2022, that's April 18). However, that path isn't always smooth. There are a few reasons why you might not receive a tax document until after you've already filed your taxes.
One common reason is that it may have been lost in the mail. If an item isn't delivered properly and gets lost in the mail system, it can show up weeks or months after it was sent.
Another reason is that the person or business preparing the tax document was delayed in their preparation. Most larger businesses have accounting services that do this very efficiently on their behalf, but some businesses may try to tackle this on their own. If a business fails to get their own paperwork organized and filed, then they may fail to get your tax documents to you efficiently as well.
The IRS deadline for sending most tax documents to individuals is January 31, but businesses can, and do, fall behind that deadline. This can result in documents arriving at your doorstep quite late.
If this happens to you, you are not immediately in any sort of trouble. You committed no fraud and did not intentionally miss any deadlines. The IRS is actually very flexible and forgiving in these types of situations.
Once you have the document in hand, however, you can't ignore it. The IRS is probably aware of the situation, since the person or business that sent you the tax document has likely also filed it with the IRS. The only reason the IRS wouldn't contact you is if they happen not to notice it. The longer you sit on the document, the more likely you'll face late fees, fines, and other penalties.
What happens if you do ignore it? You are committing tax fraud. The question is whether the IRS notices the fraud. Your best approach is to handle it immediately, as that will minimize -- and likely eliminate -- any late fees and penalties.
Your best approach with the IRS is always to take action immediately on your own behalf to set the record straight. Follow the steps below as soon as possible to ensure a tax mistake due to someone else's negligence doesn't turn into your own tax fraud. If you wait, you might not be noticed by the IRS.
But if they do notice you, you'll face many difficulties and tax penalties.
Ideally, you'll have received the tax document before the IRS has contacted you about it. In that situation, the process is straightforward. You simply file IRS 1040-X, which amends your tax return with updated information. If you used tax filing software, you can easily do this within the software. If you used a tax preparer, contact your tax preparer immediately.
If the late tax document indicates that you earned more income than you initially reported, this may result in you owing more taxes. Don't worry; the amount of actual tax you owe will always be a relatively small percentage of the new income you're reporting. Don't fear a higher tax bracket, as it doesn't mean you'll suddenly owe a ton more in taxes.
If the additional amount you owe is trivial, simply pay it. If it is enough that it may cause you hardship, you should contact the IRS directly to discuss your options.
In some situations, particularly if you receive the tax document far past the filing deadline, you may be subject to additional fines or fees. In that situation, contact the IRS directly. You may be eligible to file Form 843, which will request a waiver of those fines and fees.
Again, the IRS is flexible with those who are proactive about paying the taxes they owe and will often waive fees in situations outside of your control.
How did I handle my own late document? The IRS had not yet contacted me about it, so I quickly filed a 1040-X form along with a small additional tax payment (as the late form showed additional income that I hadn't filed originally). There were no fees involved, and the IRS never contacted me about it in any way. The process took less than 30 minutes.
I spent more time worrying about it than it actually took to resolve the situation.
If I had waited to file the document, the IRS may have contacted me about it. In that situation, I would have owed the taxes, as well as potential interest on the unpaid taxes and other penalties. Taking care of it immediately and paying the taxes I actually owed made it a minor issue.
[This article was originally published on The Simple Dollar in March, 2021. It was updated in December 2021.]