On Sunday, July 11, 2021 at 11:41:50 PM UTC-4, BignTall wrote:
> On 7/10/2021 9:32 AM, Rich wrote:
> > Relative got an approx $2000 check in *2020* as part of the High Tech
> > Employee class action case. The check came with a *2015* W-2 and
> > a *2015* 1099-MISC with Box 3 Other income.
> > Do they really need to go and amend their 2015 return at this point?
> > Or can they just wait for the IRS to notice (if it does) and bill them?
> > Thanks!
> In 2020, if the IRS received W-2 and 1099-MISC filings (why did your
> friend receive both a W-2 and 1099-MISC?) for $2000 of 2015 income, I
> would expect the IRS to more or less ignore the information. By 2020,
> the general 3 year the statute of limitations for timely filed 2015
> returns has expired. None of the exceptions that extend the SOL to 6
> years or infinity are in evidence here. Even if your friend goes to the
> effort to file an amended return for 2015 and pay the newly calculated
> taxes due, the IRS may well reject the amended return as untimely filed
> and return the 'over payment'. This seems like a "let sleeping dogs
> lie" situation.
Starting at the top - both a W-2 and a 1099-MISC were issued because part of the settlement was deemed to be wages that weren't paid due to the collusion between the tech companies and part was an additional award of damages. The 1099-MISC amount was probably exempt from Social Security and Medicare tax. In my scenario, I should have made it clear that I assumed the 2015 tax documents were sent, not as "new" IRS filings, but just as part of the package that had orignially been sent in 2015. It is highly unlikely that these documents were filed with the IRS in 2020, because had they been, the issuer would have been subject to penalties for late filing of documents that were supposed to be filed by January 31, 2016 (or somewhat later if filed electronically).
If interested, the taxpayer can determine this by requesting a Wage and Income Transcript for 2015. If the documents are listed on the transcript, they were filed timely for the 2015 tax year. If they are absent, this would be a new filing. (My understanding is that the IRS does not update the Wage and Income Transcript indefinitely.)
As to the rest of your answer, I agree with you. The IRS would ignore an amended 2015 return in most cases. In fact, I would guess that even if the check had been lost, the taxpayer reported the settlement on his 2015 tax return. Had he not done so, he should have recevied a CP2000 notice when the IRS computers did their document matching in mid 2016.
Ira Smilovitz, EA