IRS INFORMATION RETURNS

IRS information returns. Many tax forms you receive at tax time don’t go only to you: in many cases, the senders give copies to the IRS as well. Those forms, called information returns, typically are records of certain payments you received or made during the tax year that you usually need to report on your personal or business tax return. Some of the most common information returns are W-2s, which report wages earned from a job, and 1099s, which report money received for things such as freelance work, dividends or interest. But other money moves you make could put information returns in the IRS mailbox too. Distributions form retirement accounts could generate an information return, for example, as could unemployment compensation, prizes or awards, college fund withdrawals, stock transactions or canceled debt. Even paying your mortgage can generate one. IRS information returns.

Why the copies for all of these ? The IRS uses information returns to double check you. The IRS uses this system to double check the accuracy of what you are reporting, and if its not correct, the IRS will forward a letter saying we have a different amount, and you owe us money due to the error. An error that is large enough can generate massive penalties or even criminal charges. This can also lead to an audit of that tax year, and subsequent tax years, causing the taxpayer to have to spend lots of time, and potentially money to restore the wrong.

If your employer sends you a W-2 that says you earned more than you actually did, don’t ignore it or report a different number on your tax return. First, try to correct it with the employer who issued it. If that doesn’t work and you expect a fraudulent intent, you can report it to the IRS. If after you file your taxes an unexpected information return lands in your mailbox or you find one you shoved in a drawer weeks ago, you can get a do-over by filing form 1040X, to amend your tax return. If you don’t and end up with a tax debt, you may need Tax Resolution.