Answer by Wray Rives:
Yes you absolutely are required to amend your tax return and report the additional income. What is reported on a 1099 does not determine what you are obligated to report on your tax return. You should have reported all of your income, even if you received no 1099 forms.
If you do not amend the return, what will happen is you are going to get what is known as a "match up" letter from the IRS. They received the late filed 1099 and will add up all the 1099's you received. If the total you reported on schedule C does not meet or exceed the total of 1099's, you get the letter and are assessed additional tax and interest and penalties.
There is probably no way that you can avoid getting the match up letter, because even if you file the amended return today, the IRS is not going to process it and adjust the numbers in their computer for several months to show that you corrected the error. What you can do however is file the amended return before April 15 and pay any additional tax owed. Ultimately you will be able to prove to the IRS that you corrected the problem and paid the tax before the original due date of the return and you should therefore be entitled to have any interest and penalties waived.