A 1099-B is the form your broker sends you to document the gains and losses from your investments for the year. You are supposed to report the income stated on the 1099-B and attach it to your tax return. If you forget to report the income from a 1099-B, don’t panic. The Internal Revenue Service has a procedure for you to follow to correct the mistake and minimize any penalties you might incur.
When you forget to report 1099-B income or otherwise file an incorrect tax return, the IRS wants you to correct the mistake by filing an amended tax return using Form 1040X, Amended U.S. Individual Tax Return. The IRS says not to file an amended return if you simply forgot to attach a 1099-B or other form. The agency may be able to accept the return as is. If not, you’ll be sent a notice requesting further information.
Form 1040X is available on the IRS website. You’ll need to download and print a copy because amended returns may not be filed electronically. It is a two-page form. On the first page are three columns labeled A, B and C. Amounts from the original tax return are entered in column A. You enter only amounts from lines on the original return that need to be changed. The corrected amounts go in column C and the difference between entries in columns A and C goes in column B. On the back of the 1040X, or page 2, you can write an explanation of the changes. Sign the 1040X and send it to the address on the form.
When to File
When an amended tax return shows you owe additional tax, the IRS says to file it and pay what’s due as soon as possible to prevent or minimize possible penalties and interest. However, if your original return resulted in a refund and your amended return indicates you will get more money back, you should wait until the original refund check arrives before filing your amended return. You can go ahead and cash the original refund check when it arrives.
In the event you owe more taxes due to omitting the information on a 1099-B, there is no time limit for filing an amended return. The IRS will charge you penalties and interest, so you should file the 1040X as soon as possible. If the amended return shows you are due a refund, you have three years to file, or two years after you finish paying any taxes due based on your original tax return, whichever is later.