Freaked Out

Okay....I am officially freaked out. I started a company over 20 years ago. Worked very hard. Had an account that had a brain tumor. Screwed up books. Brought in new person. Straightened books. Other person doing them all this time.

NOW....I find that several HUNDRED THOUSAND dollars were under reported on the 1096 and 1099 for 2012! ARRGGHHHH.....

NOW it looks like we have to file an amended one, which will make all those people who got them very unhappy.. BUT I am also concerned about what the IRS will think when we file this amended return so late.

I need some advice from someone who knows how the IRS will look at this. I am going to have enough trouble from our associates when this hits them!!
HELP PLEASE!

Answer : 

The IRS compares the information reported by you and on forms, 1099/1096, with income and deductions reported on your income tax return.As you failed to report 1099 income on your income tax return, you may receive a Notice CP-2000. The notice informs you of the proposed adjustments to income, payments, credits, or deductions, and the adjusted amount of tax due . The first page of the notice provides a summary of proposed changes to your tax and the steps you should take to understand the notice. If you have any questions, the notice provides a phone number to call for assistance. An amended tax return generally allows you to file again to correct your filing status, your income or to add deductions or credits you may have missed. Your state tax liability may be affected by a change made on your federal return. For information on how to correct your state tax return, contact your state tax agency. Filing an amended tax return does not, in and of itself, "red flag" you for an audit. (i.e., Taxpayers filing an amended return generally do not increase their chance of being audited, an IRS manager said). However, the Internal Revenue Service notes that amended returns go through a screening process just like regular returns, which could result in an audit. Also, filing an amended return adds an extra layer of IRS scrutiny of your taxes. The IRS uses an undisclosed screening process to review incoming returns and flag those that might require an audit. According to the IRS itself, the mere act of filing an amended return won't automatically red flag your taxes for an audit or get you placed on some list from which the IRS draws names to be audited. If the screening turns up a problem with your amended return, an audit may result -- but it will be because of the content of the return, not the fact that you filed it in the first place. Though amending your taxes may not automatically place a red flag on your return, you're still…Read more..