Dear Taxguru,

I recently filed my 2006 tax return and found out that I omitted to include in income a 1099-Misc I received from a prior consulting engagement.

The amount of 1099-Misc is $10,500! I did not deliberately omit it, I just forgot to include this amount, as I do a lot of small projects and the company whom I worked sent the 1099-Misc report in late March 2006.

I am really worried as I heard from a few people at work that thare are substantial penalties and fines for not declaring the correct amount of income. I want to correct my mistake.

Can you please suggest some advise for me. Thank you..

By, the way, you have a great site, excellant questions on different subjects, all very useful stuff.

Dear Aron,

I understand your anxiety, but a lot of people tend to rush in filing their tax returns early, and very often after filing the tax returns they receive a 1099-Misc, a corrected 1099-Div or remember that they forget to include stock trades etc.

My advise to you is to go back to the CPA or your tax preparer, explain the mistake and ask him to file an amended tax return, FORM 1040X. This is the form that the CPA needs to file to the IRS. This form will report the corrected transactions which in your case report the additional income.

It is generally agreed by most CPA's that by filing a Corrected or Amended tax return, the IRS will not impose substantial underpayment penalties! And, this is the main reason to quickly file the amended return as soon as possible before the IRS imposes the penalties on you.

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