Tax season has a way of sneaking up on us. Sometimes, in the rush to get a return filed on time, taxpayers make mistakes, succumb to errors, or misreport information.
If you have fallen into this category, it’s crucial to note that you have the option to file what is known as an amended return. The question is, how? And should you do this?
What is an Amended Tax Return?
An amended tax return is a formal document that a taxpayer may file to correct a tax return from the preceding year. It’s generally used to correct errors, fix an instance of misreported income, or claim a credit that wasn’t previously claimed.
Most people file amended tax returns for one of two reasons: (1) To fix misreporting, or (2) To claim a more advantageous tax status.
Contrary to popular belief, it’s unnecessary to file an amended return to correct mathematical errors. The IRS has systems in place to automatically identify and address issues like these.
Reasons to File an Amended Tax Return
People file amended returns in a variety of situations and circumstances. Here are a few of the most common:
- You might discover that you inadvertently left some income off your return. This often happens when people forget about a 1099 for investment income or work performed as an independent contractor. It’s also possible that you overstated your income because of an incorrect statement from your employer. Either way, an amended return can ensure your correct income is properly reported to the IRS.
- Changes in deductions are another common reason for filing an amended tax return. For example, you might have forgotten to claim a dependent. The same goes for credits: If you forgot to claim a credit for which you qualify, an amended return is the best way to fix this oversight.
- In certain cases, you can go back and change your filing status to one that’s more beneficial to your tax return. This may happen in situations where an individual previously filed as Single, but qualified as Head of Household. Correcting this error could significantly alter taxes owed or refunded.
- A child can only be claimed as a dependent by one tax filer each year. If, for example, you and your ex-spouse discover that you both claimed your five-year-old son as a dependent on last year’s return, one of you will have to file an amended return. Otherwise, the IRS will implement to determine who gets to claim the child.
In full disclosure, any seasoned tax advisor will also be quick to point out that an amended tax return is not a perfect solution. It’s somewhat rigid and can be cumbersome. Some of the cons include:
- You can’t file Form 1040X electronically. It must be filled out by hand and mailed to the IRS.
- It’s not a quick process. It can take 16 weeks or longer for the IRS to process an amended return. If you’re looking for a quick resolution, your patience might be tested.
- There’s a three-year statute of limitations on tax refunds. This means you can’t go digging through your filing cabinet and try to amend a return from six years ago because of a new piece of information you discovered today.
In other words, filing an amended tax return can work well for certain situations, but be prepared for a slow, drawn-out process.
Six Steps to File an Amended Return
The IRS doesn’t want to receive a massive influx of amended returns each year, so the agency purposefully requires taxpayers to walk through a specific set of rules and requirements in order to file Form 1040X. Here are the steps you’ll need to take.
- Collect All Necessary Documentation and Records
Start by gathering up anything and everything you think you’ll need to file your amended return. This includes your original return, as well as all-new documentation to support the correction.
Take your time and don’t move forward until you have everything you need. (Note: If you no longer have your W-2 for the tax year, filing a Form 4852 will permit the IRS to issue a W-2 replacement.)
- Download the Appropriate Forms
The next step is to download and print off all the appropriate IRS tax forms for the tax year you’re amending. That last part is critical. Tax forms can change from year to year, so it’s imperative that you use the appropriate one for the tax year you’re amending: It may be different from the form that’s used today.
The IRS has a database on its website with all the tax forms from years gone by.
When you seek to amend a tax return, you’re only required to resubmit the forms and areas that are directly affected. There’s no need to file an entirely new return. Gather the forms you need and move on.
- Complete Form 1040X
Assuming your original tax return was prepared and filed using Forms 1040, 1040-SR, 1040EZ, 1040EZ-T, 1040A, 1040NR, or 1040NR-EZ, you’ll need to use Form 1040X to amend it your return. (If you’re amending more than one tax return, you’ll have to file a separate Form 1040X for each and every tax year.)
Fill out Form1040X with all necessary information. You’ll also be asked to include any supporting documentation. It’s best to be as thorough as possible.
If you have two or three different documents to support a single correction, label and include each of them. You want to leave no doubt in the IRS’s mind that your amended return is accurate.
Form 1040X also provides a space where you’re allowed to write an explanation. Explain your justification as clearly yet concisely as possible.
- Double-Check Your Amended Return
The worst thing you can do is send over an amended return that also has errors or omissions. This will only further confuse the situation and lead to more red tape and delays. Double- and triple-check your amended return prior to submitting.
As a side note, if your amendment is going to result in a higher tax bill, you should go ahead and include the additional payment with the new return. Even if it doesn’t cover all the additional taxes owed, sending some payment exhibits goodwill and can minimize the interest and penalties you may owe.
- Properly Submit Your Amended Return
As mentioned, you have to submit an amended return by mail. Follow the instructions on how and where to mail the return.
Prior to sending, make copies for your own records. If you want peace of mind, you might even order tracking/delivery confirmation on the envelope.
- Be Patient
This isn’t a quick process. It’s going to take the IRS a minimum of eight weeks to process your amendment.
If you send it during the busy tax season, it could take as long as 16 weeks. Try to remain patient and give the IRS time to handle your request before contacting the agency with questions or concerns.
Taxfyle: Making Tax Returns Effortless
At Taxfyle, we understand how busy tax season is. We also know how frustrating it can be to file your taxes on your own—particularly when oversights and mistakes require additional amendments and paperwork.
We also want to assure you that you aren’t alone. Taxfyle is your on-demand tax partner.
When you work with us, we connect you to qualified CPAs within our robust network of experienced and certified tax professionals. This allows you to sit back and relax while your preparer handles all the details.