What happens if you forget to report income on tax returns but it doesn't change your tax liability?

So I just realized I completely forgot to include about $425 in interest income from my savings account on my 2023 tax return. I was going through some old bank statements and noticed it. The thing is, I ran some quick calculations and adding this income wouldn't actually change my final tax liability at all. I'm wondering if I should bother filing an amended return or if I can just let it go? Does the IRS flag these kinds of small omissions even when they don't affect how much tax I owe? And would there be any penalties if they catch this mistake without me fixing it first? I'm not trying to avoid paying anything - the tax amount would literally be the same - just trying to avoid unnecessary paperwork if possible.

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20 comments

Hannah White

•8M

This is actually a common situation! Even though amending wouldn't change your tax liability, technically the IRS still expects you to report ALL income regardless of the amount. The IRS receives a copy of your 1099-INT from the bank, so they do have record of that interest income. While the penalties for underreporting are typically based on the additional tax owed (which in your case is zero), there's still a possibility of receiving a CP2000 notice from the IRS flagging the discrepancy. They might assess a minimal accuracy-related penalty even if no additional tax is due. My recommendation? File Form 1040-X to amend the return. Since there's no additional tax due, you won't owe interest or substantial penalties, but it puts you in compliance and avoids potential headaches down the road.

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Hannah White

•8M

Since there's no additional tax due based on their calculations, there wouldn't be any interest charged - interest only applies to unpaid tax amounts. And you make a good point about amending returns sometimes creating more scrutiny, but in this case, it's actually the safer option. Filing the 1040-X here is straightforward since you're just adding the interest income without changing the tax due. The amendment creates a paper trail showing you voluntarily corrected the issue before the IRS contacted you, which actually reduces your risk profile rather than increases it.

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Mateo Silva

•8M

I went through something similar last year when I forgot to include some dividend income on my tax return. I was stressing about it until I found https://taxr.ai - it was seriously helpful for my situation. I uploaded my documents and it analyzed everything, showing me exactly what I needed to report. Their system flagged my missing 1099-INT and ran the calculations to show that my tax liability wouldn't change, but also warned me about potential accuracy penalties that could apply even without additional tax due. It outlined the exact amendment process I needed to follow and explained why fixing it was important for my specific situation.

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Mateo Silva

•8M

Yes, it does handle state tax implications! That was actually really helpful in my case because while my federal liability didn't change, adding the interest income did slightly affect my state taxes. The tool analyzed both and showed me the difference. For your question about accuracy - it's not generic advice at all. You upload your actual tax documents and returns, and it uses AI to analyze your specific situation. It identified exactly which forms I needed to amend based on my personal tax data, not just general guidelines. It was surprisingly detailed.

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Cameron Black

•8M

Wow I need to apologize for being so skeptical about taxr.ai in my earlier comment. I decided to try it myself since I realized I had a similar issue with some forgotten income from a side gig. I uploaded my tax documents and it immediately identified the missing income and showed me that while my federal tax wouldn't change, I did owe a small amount for state taxes. The breakdown was super clear and it gave me step-by-step instructions for filing the amendment. Saved me hours of research and worry! Way more personalized than I expected.

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Jessica Nguyen

•8M

If you're getting notices from the IRS about this unreported income, don't panic! I had a similar issue and spent WEEKS trying to get through to the IRS phone lines. Eventually I found https://claimyr.com which got me connected to an actual IRS agent within 45 minutes instead of the usual hours-long wait. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained that even though my tax liability didn't change, I still needed to file an amendment to avoid future issues. She walked me through exactly what forms I needed and how to properly document everything. It was such a relief to speak to someone directly who could address my specific situation.

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Jessica Nguyen

•8M

The service doesn't just call for you - it navigates the IRS phone tree and waits on hold so you don't have to. When an agent finally picks up, you get a call connecting you directly to them. It basically handles the most frustrating part of contacting the IRS. It works because they have technology that keeps your place in line while you go about your day instead of you personally sitting on hold for hours. I was skeptical too until I tried it. They also provide you with a transcript of your call afterward which was helpful for documenting what the IRS agent told me about my amendment.

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Ruby Garcia

•8M

I have to eat my words about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my unreported income situation, so I decided to try it anyway. Holy crap it actually worked! I got a call back in about 35 minutes connecting me to an IRS representative. The agent confirmed exactly what I needed to do - file the 1040-X even though my tax amount wouldn't change. They explained that fixing it now would prevent potential automated notices and penalties down the road. Having that direct confirmation from the IRS gave me huge peace of mind instead of just guessing what to do.

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Alexander Evans

•8M

Just as another data point, I had a similar situation where I forgot to report about $500 in freelance income. The IRS did eventually send me a notice (CP2000) asking about it. Even though it didn't change my overall tax due (because of other deductions), I still had to respond and correct the record. The process wasn't terrible, but I wish I had just amended it myself when I first noticed the error. Would have saved me some stress when that IRS envelope arrived in the mail!

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Alexander Evans

•8M

They initially proposed a small accuracy-related penalty in the CP2000 notice, but I wrote a response letter explaining that it was an honest oversight and that it didn't change my tax liability. I included all the supporting documentation showing how my tax calculation remained the same. The IRS actually waived the penalty after reviewing my explanation. I think they're more reasonable with honest mistakes, especially when no tax is due. With crypto though, they might look more closely since that's a focus area for them currently. I'd definitely recommend being proactive with your situation.

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Andre Rousseau

•4M

Just wanted to add my perspective as someone who works in tax preparation - even though $425 seems small, the IRS matching program is pretty thorough these days. They automatically cross-reference 1099-INT forms with what's reported on returns. The good news is that since your tax liability wouldn't change, you're not looking at any substantial penalties or interest charges. But getting ahead of it with a 1040-X amendment shows good faith and prevents the hassle of dealing with automated notices later. One tip: when you file the amendment, include a brief explanation letter stating that this was an inadvertent omission and that no additional tax is due. This helps streamline the processing and reduces the chance of follow-up questions. The whole process is pretty straightforward when there's no money changing hands.

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