Gregory Burke

Ask the experts: Do I need to file an amended return?

Published: Wednesday, May. 22, 2013 - 12:00 am | Page 7B

The April 15 tax season may be over, but tax questions still linger. Here with some answers is Gregory Burke, a former IRS auditor who's a longtime CPA with John Waddell & Co. in Sacramento.

I filed my federal return on May 10, received an amended 1099 dated March 15, a second amended 1099 dated April 1, and then a third amended 1099 dated April 15! The total net changes are less than $20. Filing a 1040x for 2012 seems like a lot of pointless work.

Can I account for these changes on my 2013 federal return rather than file a 1040x for 2012? Thanks for your help.

You are not alone in receiving a corrected 1099 containing small dollar-amount changes. Brokerage companies are sending them out by the thousands.

The general rule is that each tax year stands alone. It would not be appropriate to report a 2012 change on your 2013 tax return.

The more pertinent question is whether you should amend your 2012 return when the change in tax owed would be inconsequential. In my opinion, the answer is "No."

A $20 change in interest or dividend income would produce, even at the top 35 percent federal tax bracket, no more than a $7 change in tax.

My recommendation would be to keep the corrected 1099 with your 2012 income tax return and let the IRS decide whether to send you a notice asking for the additional tax.

Chances are they won't, as it is probably not worth their expense. Even if they do, the interest on the additional tax is probably a lot less than the cost of amending your return.

My wife and I are both retired and have no mortgage. We use the standard deduction and have a very simple tax return. We each receive a 1099R, a SSA-1099 and a consolidated 1099 for investments. We have no other dependents or deductions.

About six years ago, our tax preparer charged what I felt was too much. Each of the next two years, I changed tax preparers. I always took in the previous year's return to simplify their job.

Each year, the return cost a little more; the final bill was $350. None of the preparers would give us a cost estimate prior to doing the return. The last four years, I have done our taxes myself.

My question: How do you find a tax preparer willing to provide an estimate before starting work on your return?

In my experience, very few tax preparers give a fixed fee quote in advance of providing services. To find one who does, I suggest calling tax preparers in your area to ask if they prepare returns for a fixed fee and ask for a quote in advance. Be sure to get the quote in writing.

You could also ask friends, bankers or attorneys for recommendations of tax preparers. Call those referrals to see if they offer fixed-fee services.

Most tax preparers don't give fixed quotes because of the difficulty in anticipating the complexity involved in preparing a client's tax return, especially the first time.

What may appear to be a simple matter of entering data from your 1099 forms can become a lot more complicated. For instance, you mention receiving a consolidated 1099 form. If you sold any stocks or mutual funds starting in 2010, the preparation of your tax return got more complex because of rules enacted by Congress. Brokerage firms now must report information on both the purchase and sale of stocks and mutual funds. From your perspective, your consolidated 1099 form appears the same as before. From a tax preparer's perspective, what used to be a relatively simple transaction to report became twice as complicated, requiring more time to input and check the data in your return.

That is just one example of how something that appears simple may contain hidden complexities that can't be fully anticipated. That is why experienced tax preparers rarely give fixed fee quotes. – Compiled by Claudia Buck

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