IRS will likely let you slide on minor tax form errors

When I was looking over my 1996 taxes (while I
was doing the 1997 one), I noticed I put my Schedule C income on the wrong line
(alimony line I think) on the 1040. Do you think they will figure out the
mistake since they have the Schedule C, or do you think I need to send them a
letter or an amended return, or just let well enough alone?

P.H., Indianapolis

The first thing that occurs when you send in your tax return, is that someone at the IRS looks to see if you owe money. If your tax return shows that you do owe money, the IRS person looks through your envelope for a check, and hurries that check off to the bank for deposit. Any questions that need to be asked can wait, as far as the IRS is concerned. After all, isn't that what you would do if you received truckloads of envelopes containing millions and millions of dollars each spring?

The next thing the IRS does when processing your tax return involves entering the numbers right off your tax forms into a gigantic computer that is approximately the size of Connecticut. The meticulous computer checks to see that everything adds up properly and that all the supporting forms agree to the numbers you show on your 1040. This is where your Schedule C/Alimony problem probably surfaced. If there is an error on the forms that requires a change in the tax return, the faithful IRS computer prepares a nice form letter telling you that your deductions have been disallowed and you owe an additional $3 million in income tax.

Okay, maybe that's a bit of an exaggeration. Or at least only a lucky few people get letters like that one. But if there is some confusion in the mechanical mind of the venerable IRS computer, a letter will be produced stating what kind of problem gave it such a migraine and what the kind-hearted computer thinks you should do about that problem. All of this happens within the first six weeks that the IRS has your tax return.

So, if you filed your 1996 tax return on time (sometime on or before April 15, 1997), and have yet to receive any correspondence relating to this accidental blunder, chances are you are off the hook. I imagine the misrepresentation of your Schedule C income as alimony was recognized as an honest human error right away and very little if any time was spent trying to figure out from where the mysterious alimony was coming. Any correspondence that you send to the IRS at this point would probably just confuse the matter.

On the other hand, the immense IRS computer may, at this very moment, be spinning its gears and searching its endless loops for that former spouse of yours who is entitled to a juicy deduction for all that alimony that was paid to you. If that's the case, why, any one of us taxpayers might receive a letter at any moment offering us a huge refund due to the alimony deduction we forgot to claim.

If any of us receives such a letter, we should be sure to look through the envelope for the check and hurry it off to the bank. We can wait to ask questions later.

I just received a K-1 form for 1997. This form
came from a partnership I belong to but don't actively participate in. The form
shows a small amount of income as my share of the partnership. Should I amend my
1997 tax return to reflect this income? I've already received my refund for
1997.

R.E., Indianapolis

You guessed it. You should amend 1997's tax return by filing a form 1040X. In the three columns that appear on the front of the 1040X, list the original numbers that appeared on your 1997 tax return, the numbers that changed, and the new, revised numbers. On the back of the form is a space where you can explain the reason for the amended return. In this space you should specify that you just now received your K-1.You should attach the Schedule E, page 2 of your tax return showing the correct amounts from your K-1 form. Any other forms that changed as a result of your partnership information (such as Schedule B, if interest income was passed through to you from the partnership) should also be attached to your 1040X. Any additional tax you owe must accompany the 1040X. You have until April 15, 2001, to file the 1040X.


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