File an amended return or wait for the bill?

Finance Tax
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You might remember a post I made back in August where I talked about my wife’s employer and their incompetent payroll department. Fast forward six months after their finance director resigned and several audits were completed…

We are getting W2-C’s for 2020, 2021, and 2022. I don’t yet have numbers for 2022, but for the other two years, there is a slight increase in income. About $260 for 2020 and $145 in income for 2021. I had originally thought it might be higher, but additional errors were made that reduced our taxable income.

With our marginal tax rates, I expect the ballpark of tax due for those two to be about $90 in 2020 and $50 in 2021.

Now my questions:

  • Does the IRS care about such small amounts of tax due? Is there any safe harbor for small errors like this?
  • Do I bother filling out 1040X’es for these years, or do I wait for a possible CP-2000/bill from the IRS? Filing the amended return costs money (unless I file on paper… and that tends to get lost in the ether for months) so I’d rather wait for the bill.
  • My understanding is that the drop dead date for amended returns is 3 years after the filing date, which is pushed to the deadline if you file early. That would be April of 2024 for tax year 2020. Seems like I should just wait and see if the IRS cares to go after us for $90 regardless of what I do in the other two years?
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A couple hundred dollars of income 4 years ago? I’d just wait for them to contact you. Good chance they never will.

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The “right” way is to amend. But they’ll eventually reconcile it and send a letter audit thing. CPx000 or whatever. I guess you could send payments for the appropriate tax years to stop the clock right now on interest or whatever.

Or maybe they won’t and the time limit will expire on it.

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IANAD, I would wait and see.

(I am not a DENTIST! ha - I crack myself up…)

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Yes and no.

I would be “unaware” of the 2020 notice, as it’s unlikely that the IRS’ 70,000 new agents, dedicated to “nailing the rich” will get up to speed in time to catch your 2020 sins. The later years’ will accumulate both penalties and interest, including interest on the penalties. I would file amended returns for 2021+, and try to use them as evidence that you weren’t trying to avoid taxes. This may help eliminate penalties but that’s a crapshoot, and they rarely forgive/negotiate on the interest.

Good luck.

ETA: I just realized the numbers involved. Ignore everything above. It won’t make a hill of beans difference what you do.