Filing taxes can be stressful, add to that, realizing you’ve made a mistake after you’ve submitted your return! The knee-jerk reaction might be to file an amended return right away to fix the error. However, you need to take a breath and look at the big picture before pulling the trigger on the Form 1040-X “Amended U.S. Individual Income Tax Return”
A. Do You Really Need to Amend?
Good news! Not every mistake requires an amended return. If you’ve made a simple math error, the IRS may correct it for you. Or, if you forgot to attach to include a form with your filing, the IRS might simply ask you to provide the missing information. On the other hand, an amended return is usually necessary if you’ve:
- Failed to report income
- Need to change your filing status
- Change the dependents claimed on your return
- Made an error in deductions or credits claimed
B. Timing Matters
Put some consideration into the timing of when you file an amended return. The IRS allows you to amend a return up to three years from the date you filed the original return or within two years of paying the tax owed, whichever is later. You don’t want to file until your original return is processed. You don’t want to file before you’ve received the refund from your original filing, if applicable. But you do want to file and pay asap because interest and penalties start accruing from the original due date, not the amendment date. That’s right, if you file an amended return a year after the original due date and OWE, the IRS will charge you penalties and interest for the one year you waited to report/pay.
C. Know the process
Amended returns take up to 16 weeks to process, so patience is key. While the processing time is usually shorter if you e-file the return rather than paper file, the processing time is still longer than a “regular” tax return.
D. Be Specific and Provide Documentation
When you file an amended return, you will use Form 1040-X to provide a detailed explanation for your amendment. This is done in Part II. Attach all relevant forms or schedules that are affected by the changes. While attaching your entire Form 1040 package is not required, I recommend it for clarity.
E. Know the State Tax Implications
Amend your state tax return when you amend your Federal. Each state has their own amendment processes, check online. Failing to amend your state return will result in guaranteed headaches as most states communicate with the IRS regarding income tax reporting. If one doesn’t match the other, you will hear about it.
F. Electronic Filing Option
Good news—you can e-file some amended returns. Use the same method you used for filing the original return. E-filing of amendments is a recent development, and it really speeds up the process and reduces errors compared to paper filings.
What are the steps to filing an amended return?
- Grab your copy of the originally filed return
- Determine exactly what needs to be changed and in what way
- Re-prepare your tax return using the current information
- Fill out Form 1040-X using the Original return and the Correct Return
- Prepare any state(s) amendments that are applicable
- Submit all the amended returns (e-file or paper filing)
FAQs
Here are a few Frequently Asked Questions and Notes about filing amended returns:
- No, you can’t file an amended return to change your filing status from Married Filing Joint to Married Filing Separately if the due date of the return has passed.
- No, you can’t just “Cancel” an income tax return you have filed with the IRS.
- If the error, or income difference is small, you may risk it and see if the IRS catches it. But if the error is large, you run the risk of incurring the dreaded Accuracy Related Penalty. Either way, it’s up to you. Know the risks.
- If the change amount in column B is negative, put a “-“ in front of the amount.
- Don’t include the Originally Filed tax return with your amendment.
- Use your CURRENT address on your amendment. If you’ve moved, don’t use the address from the original return.
- You need to prepare a separate Form 1040-X for each year that needs to be corrected.
Filing an amended return can be the right move if you’ve made a mistake on your tax return, but it’s important to approach it with your eyes wide open. Understand when an amendment is necessary and following the correct process is critical to fixing problems rather than creating new ones!
