[Anonymous]

So this question isn’t related to the CPA exam, but I figured this could be a good place to pick some brains. I know its strange for a CPA to be asking this question, but I don’t do taxes. I recently filed my taxes and received a refund. However, I received a 1099-INT that I was not expecting after I had filed my return and it was accepted. The 1099-INT is for Savings/Checking account interest of $13 (just over the $10 threshold). I went to create an amended return through Turbo Tax and when I enter the additional income, it says I don’t owe anything additional. My first question is why wouldn’t my tax liability change? Shouldn’t I owe a couple of dollars in tax from this? My second question is that if I truly do not owe any additional tax, am I required to file an amended return?

I am not taking any responses as “official” tax advice. I just figured I would pose the question in case its something really simple such as amended returns are not required if the tax consequences are less than $5 or something.

Think of this as practice for all you aspiring tax CPAs 😉

[jm962011]

You don't owe additional tax because the $13 increase in income didn't put you into a different income tax bracket.

For example, let's say if you are a single filer and have income of $1,000 without the interest. You'll pay $101 in tax.
Now, lets add the interest and your income is now $1,013. You'll still pay $101 in tax because the tax owed doesn't increase until the next tax bracket which is $1,025.

This is why it sucks to be making only $1,000 vs $1,024 because the tax rate for $1,000 is 10.1% and the tax rate for $1,024 is 9.86%

Now, if you had income of $1,015 without the interest, your tax would be $101 (9.95%). With the interest, your income is now $1,028 which puts you into the next tax bracket and your tax is now $104 (10.11%)

Check out the tax brackets from the IRS: https://www.irs.gov/pub/irs-pdf/i1040tt.pdf

I'm not sure if you need to file an amended return or not. Does turbo tax give a 1-800 number? You could also call the IRS (I heard wait times are insane) and ask a hypothetical question anonymously. I probably wouldn't file an amended return since there wasn't a change in the tax amount due and even if you made $1,000 (I'm sure you made more if you made $13 in interest from a bank….) the $13 is immaterial. If you felt guilty, you could pick it up next year.

[Anonymous]

No disrepect jm but that answer is completely wrong. That is not how tax brackets work. Tax brackets increases your tax on incremental income at your marginal rates. It isn't a range that u pay a flat tax on.

Op, your tax didn't change because u either have unused credits or deductions on your return.

I wouldn't file an amended return for something that small even if ur taxes went up 5 dollars. There is no di minimis threshold I am aware of but that is just too immaterial even if u owed an additional 3 $

[elprezidente07]

A matching notice would be more risky than the failure to pay the pennies of tax.

What I'm gaining from the thread is that being certified does not equate to understanding the material and applying it.

AUD // F x2 P 92- (Test server crashed! It really does happen!)
REG // F, F, F, P - 75 Aug 2014
BEC // P - 80
FAR // F, F...now its time for my greatest trick yet.
Ethics // Very.

75 to stay alive

[Anonymous]

A potential matching notice for a 13 $ 1099 int. Your going to advise your client to file an amended return over this? Obviously u don't work in the business. Here client pay me 250$ to amend your return to avoid a potential 13$ matching notice with no additional tax due. Great advice!

[elprezidente07]

I would not have my client file the amended return either. Just saying that $1 tax isn't the worst problem here.

AUD // F x2 P 92- (Test server crashed! It really does happen!)
REG // F, F, F, P - 75 Aug 2014
BEC // P - 80
FAR // F, F...now its time for my greatest trick yet.
Ethics // Very.

75 to stay alive

[Anonymous]

Ok good advice. I don't mean to fire off. Thanks

[Tncincy]

No No amendment needed for 13.00. There is no penalty to pay.( assuming from the info of above, and not seeing the return) I would be surprised if the IRS sent a notice.

It begins with a 75
Been here too long as a cheerleader.....time to pass

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Jay]

It's immaterial. Don't amend. If they send you a penalty (very doubtful), just pay that. You can always claim it next year if you want. You would have to mail an amended return. The postage expense would probably be more than the tax.

The CPA journey is truly a nightmare.

REG 82 (08/08/15)

[jm962011]

can someone other than c9p9a9 please let me know if my answer about tax brackets was correct?….

[Jay]

@jm962011 your answer is wrong for a few reasons.

1. You say “Income” when in fact you mean “Taxable Income”.

2. The Tax bracket refers to the tax rates of 10, 15, 20, 25, 28, 33, 35, & 39.6. The tax rate you are referring to is the individuals “Effective Tax Rate”. That's the 9.95 and 10.11.

I think you're confused because the link is to a “Tax Table” which tells you how much tax you would owe at different Increments of Taxable Income.

You chose a bad dollar amount to use as an example. i.e. $1000. Read up some detailed examples of Tax Bracket.

The CPA journey is truly a nightmare.

REG 82 (08/08/15)

[CPA2BEE]

You get matching notices for things like under reporting rental income by $10,000 – not $13 of unreported interest income. Don't sweat it and don't waste your time or money on an amended return.

CA CPA - est. Dec 2016

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[the LAST Coffee]

As a tax accountant, it seems to me the problem lies with matching penalty. However, it is unlikely IRS will go that far over $13. It's really immaterial.

As for why your tax liability hasn't changed, you may have unused deductions and/or credits.

FAR 84 (AUG '15)
BEC 83 (AUG '15)
AUD 79 (OCT '15)
REG 71, 78! (NOV '15, FEB '16)

[Anonymous]

It took more time to write this post and scan through the answers than it would have just to amend it.

If it were my client, I would advise them that they could receive a matching notice but that the tax difference is $1. They should be able to read between the lines.

If it was my own return, since I didn't max my prior year IRA contribution, I'd simply make a $13 contribution and apply it to 2015, and not do anything further. The additional contribution would even out the AGI as if nothing happened.

[EuroAddict]

It's $13.

File it away and move on with your life.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[WaivingMyHands_ALOT]

(1) Don't file amended unless you are OCD and can't sleep at night knowing your 1040 doesn't match perfect.

(2) The first response from JM has plenty of errors in it, but not completely incorrect. The tax tables referenced in JMs post are used to simplify tax calculation for people making less than $100K (threshold may change annually). You don't actually use tax brackets/rates to compute your tax. I'm thinking this was IRS solution to people constantly screwing up tax calc on returns.

Basically, IRS brackets income into groups of $25 ($1000-$1025, $1025-$1050, $1050-$1075, etc.). If your taxable income falls within these brackets, you owe whatever tax is associated with your bracket. So a person reporting $1010 of taxable Income and a person reporting $1020 of taxable income = same tax. This is likely why your $13 Form-1099 has no impact in your tax due/reduces your refund (it didn't push you into a different income grouping).

Note that this is different from a tax bracket/marginal rate (which isn't actually used unless you're making greater than $100K). I'll table an explanation for tax bracket as I'm sure there are tons somewhere on the forum.

AUD 99
BEC 96
FAR 94
REG 96

[Author]

Replies