Correcting a tax return doesn’t always require fear or delays. If you discover an error — perhaps omitted income, a missed deduction, or a changed filing status — you may be able to fix it by filing an amended return. This guide explains when you need to amend, how to do it properly, deadlines to meet, and steps to minimize headaches.
An amended tax return is an official way to make changes to a tax return after you’ve already filed it. Changes can be made for several reasons, but it’s often due to incorrectly declaring income sources in the original filing. If the changes caused you to underpay your taxes, you would need to make an additional payment to the IRS. If you overpaid, the IRS would refund you the difference.
Note that you can’t amend taxes indefinitely. Generally, you need to submit an amendment no later than three years from the original filing date of the tax return or within two years of paying the tax for that year if you want to claim a refund. Once these time limits have passed, you generally won’t be eligible for a refund anymore, although certain exceptions can apply in limited circumstances, such as federally declared disasters or some special claims involving bad debts, worthless securities, foreign tax credits or deductions, and net operating losses.
You should consider amending your return if, after filing, you discover that:
For example, you may want to amend if you later realize it would have been more advantageous to file as head of household instead of single, if you reported the wrong number of dependents, if you received a corrected tax form after filing, or if you determine that you were entitled to an additional deduction or credit. In some cases, taxpayers also amend due to retroactive tax law changes.
However, you normally do not need to amend minor math or clerical errors; the IRS often corrects those during processing. You’re also generally not required to amend simply because you forgot to attach a form such as a W-2 or schedule — the IRS will usually request missing documents if needed.
In addition, receiving a CP2000 notice, sometimes called an underreporter inquiry, does not automatically mean you need to amend your return. If the information in the notice is correct, you may not need to amend unless you also have additional income, credits or expenses to report. Likewise, receiving an IRS audit notice is not, by itself, a trigger to file an amended return. Read the notice carefully and respond to the issues identified.
Use Form 1040-X, Amended U.S. Individual Income Tax Return — do not submit a second original return. Include corrected copies of all relevant forms and schedules for the year you’re amending. Each tax year you amend requires its own Form 1040-X, and you can file more than one amended return for the same tax year if necessary.
Amending a return is also a good opportunity to review the original filing carefully. Don’t just fix the item you already know is wrong — take the time to recheck the rest of the return, supporting math, income items, deductions, credits and documentation. Depending on the changes, you may need to attach substantiating documents such as corrected W-2s, 1099s, Schedule A or other supporting forms.
For more recent tax years, the IRS allows certain amended returns to be filed electronically, while some older-year amendments may still need to be filed on paper. If you’re amending multiple years, each year must be prepared and filed separately.
To claim a refund from an amended return, you generally must file by the later of:
If you filed the original return early, it’s generally treated as filed on the due date, usually April 15. If you had an extension but filed before the extension deadline, the filing date is generally when the IRS received the return. Some specialized claims can follow different timing rules, so it’s worth checking before assuming you are out of time.
If the amended return results in additional tax owed, you should file and pay as soon as possible to help minimize interest and penalties. If you’re expecting a refund from your original return, it’s generally best to wait until the IRS processes that original return before filing an amendment.
The IRS generally corrects mathematical or clerical errors, or requests missing schedules or forms, meaning you usually don’t need to amend for those issues alone. You should amend if the changes involve substantive items such as income, deductions, credits, filing status or dependents.
Some taxpayers worry that filing an amended return will increase their chance of being audited. In general, that concern is overblown. One of the redirect articles specifically notes that there is no evidence that the IRS is more likely to audit someone simply because they filed an amendment. In practice, the IRS primarily wants the return to be accurate.
That said, accuracy and documentation still matter. An amended return should be complete, well-supported and consistent with the information the IRS has on file.
If you end up owing additional taxes as a result of amending, you should pay those as soon as possible to mitigate penalties and interest. According to one of the redirect articles, if additional tax is not paid within 21 calendar days from the date of notice and demand for payment — or within 10 business days if the amount is $100,000 or more — the late-payment penalty is generally one-half of 1% of the unpaid amount for each month or part of a month the tax remains unpaid. Interest may also apply. In some cases, penalty relief may be available if you can show reasonable cause, and taxpayers who can’t pay in full may be eligible for an installment agreement.
Processing amended returns can take weeks and sometimes longer, especially for paper filings. You can track the status of an amended return through the IRS “Where’s My Amended Return?” tool.
Remember that changes to your federal return may also affect your state tax return, so you may need to file a state amendment as well. An amended federal return can also affect other calculations, including alternative minimum tax exposure in some cases.
Filing an amended return is relatively straightforward if you expect a refund and you’re within the applicable deadline. But when you’ve underpaid your taxes, filing an amended return can be more delicate. Generally, if the original return understated your tax bill by only a small amount, your tax advisor may recommend amending the return and paying the additional taxes, interest and penalties as soon as possible. For larger understatements or more complicated returns, professional guidance is often the smarter path.
Amending tax return filings can be uncomplicated, but they can also be tedious. If you’re unsure how to proceed or whether you even need to amend, your Porte Brown advisor can help you determine the best course of action and file corrections as accurately and efficiently as possible.
Get in touch today and find out how we can help you meet your objectives.
