8 Tips for Filing an Amended Tax Return

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You filed your taxes, but there is a mistake or perhaps a missed opportunity. What now? It’s time to file an amended tax return. Here are some key rules and other items to keep in mind.

1. You’re not required to amend your tax return

The IRS requires taxpayers to file tax returns each year if their income is higher than certain thresholds. It shouldn’t go without saying that the IRS takes this requirement seriously. You can actually be prosecuted for a misdemeanor if you fail to file, or, if you file a return falsely, you could be charged with a felony. Fortunately, however, once you’ve met your initial filing requirement, you cannot be prosecuted for not filing an amended tax return.

2. You can’t pick and choose

As explained above, you may not be required to file an amended tax return, but if you do, you must correct everything. The law does not allow you to change only certain items, whether or not those changes result in your getting a larger refund or ending up with a lower additional liability. In general, all tax returns must be filed completely and accurately and done so to the best of your knowledge.

3. You might be able to e-file.

Previously, no matter how you filed originally, whenever you file an amended tax return, it had to be on paper. The IRS recently announced that e-filing is now available for 2019 1040X. (If you’re filing an amended return, you must use Form 1040X, regardless of whether you originally filed Form 1040, 1040A, or 1040EZ.)

4. Treat each year on its own

Suppose you do need to file an amended return. In that case, you need to file a separate Form 1040X for each year, and each time, you amend — even if you are amending a return you previously amended.

5. Increased audit risk

In general, it’s more likely that amended returns will be audited and examined than original returns.

6. You have flexibility in applying refunds

If your amended return results in you receiving an additional amount as a refund, you can choose to apply the refund as a payment against future tax liabilities, rather than actually receiving the refund.

7. A statute of limitations that’s “kinder and gentler”

Generally, the IRS has a three-year window during which they can decide to audit a tax return. However, in the case of amended returns, that same statute of limitations does not apply. Suppose your amended return results in you owing additional tax and is received within 60 days before the original three-year window expires. In that case, the IRS has only 60 days after receiving your amended return to make any assessments.

On the other hand, if your amended return results in an additional refund, there is no change in the original three-year statute of limitations.

8. Any interest and penalties still apply

If you amend and end up owing more than you did originally, you could be subject to interest and penalties. The worst part about such interest and penalties is that they apply to the difference owed on the amended tax return starting from the date of your original return filing. Don’t assume that you can ignore this point; if you do not include payment of the interest and penalties yourself, the IRS will calculate the interest and penalties and send you a bill.

Considering filing an amended tax return? Contact us to talk about your options and if it’s right for you.