Filing an Amended Tax Return by Carolyn Flaherty

So you got a jump on things, filed your return early… and then received an unexpected Form 1099 that should be reported. Maybe your investment advisor found a mistake and mailed you a corrected Form 1099 after you filed your return? You filed as married filing jointly and realized later that this year married filing separately generates a lower tax liability. Perhaps you found a mistake when you did the spring cleaning of your finances? Regardless of how the error occurred you need to know how and when to file an amended tax return.

First, you do not typically need to file an amended return for math errors. The IRS automatically corrects the errors and changes your refund or liability for you. Neither do you need to file an amended return if you neglected to attach required forms. The IRS will contact you to request forms if they need them. However, you should consider an amendment if filing status, income, deductions or credits require adjustment.

Amendments generally must be filed by the later of three years from the date you originally filed the tax return or two years from the date the tax was paid. You must prepare a Form 1040X to amend your return. As you compile your amended return, consider the following:

1.       You cannot correct a prior year error on your current year return. You must go back and properly report the item in question in the year that generated the error.

2.       If corrections are necessary for more than one year, you should prepare a Form 1040X for each year and mail them to the IRS separately.

3.       Include support for your changes with Form 1040X. For example the corrected or additional 1099, W2 or other forms should be attached and mailed with the amendment.

4.       Form 1040X cannot be filed electronically.

5.       If you are filing an amended return to claim an additional refund: file after receiving your initial refund. You may utilize the original refund: the IRS will remit the differential after the amendment is processed.

6.       If you are filing an amended return that results in additional tax liability: remit payment with the filing so that penalties and interest can be minimized.

7.       Amended returns will take up to twelve weeks to process.

Mistakes can occur whether you prepare your own return or consult with a CPA to do so. Our blog posted February 19, 2011 “Should I prepare my own tax return,” (direct link: http://www.prrllc.blogspot.com/2011/02/should-i-prepare-my-own-tax-return-by.html), may help you decide how to proceed. As stated in that blog, regardless of whether or not you are confident in your ability to prepare your own returns; we strongly recommend that about every three years you go for a financial “checkup.” If a professional finds missing deductions or mistakes during their review; you will have the ability to amend during the three year period.

In addition, sometimes an IRS Notice will be the catalyst for an amended return. The most important thing to remember upon receiving a notice form the IRS is not to panic. Review our blog published January 19, 2012 “What to do if you receive an IRS Notice,” (direct link: http://www.prrllc.blogspot.com/2012/01/accounting-news-has-been-reporting.html), and consult your tax advisor so they may review your return and properly advise you.