How to file an amended tax return

If you are having that “oh no” moment that means you made a mistake on your tax return and need to file an amended return, don’t panic.

Crystal Stranger, Registered Agent, Author of The Small Business Tax Guide and Director of International Taxation at ABG tax, says having to file an amended tax return is not a big deal.

“Filing amended returns is quite common and is done for a number of legitimate reasons,” she says.

Here’s what you need to know before you change your tax return.

How an amended tax return works

If you make a mistake while filing your annual tax return, you can correct that error by filing an amended tax return. The form you must file to amend your return is called Form 1040-X, the amended US personal income tax return.

Until August 2020, you had to print a hard copy of Form 1040-X and mail it to the IRS, whether you filed your original return by mail or online. But the tech arc has finally prevailed, and you can now file amended returns for 2019 – and all years to come – on your online tax software, provided you have filed your original tax return online.

Stranger says common reasons you need to change your tax return include:

  • Change in income or expense amount after discovering you miscalculated when filing for the following year
  • Add tax credits that were previously overlooked
  • Carry forward losses from previous years to offset your income and obtain reimbursement
  • 1099 tax return that you haven’t filed before (the IRS will often send you a letter in this situation)

If you need to file an amended return, according to the IRS, you have three years after the date you filed your original tax return (the one with the error you are now trying to correct) or two years after filing. date you paid your tax (if you owe it) to file your amended return. If you filed your original return before the April 15 due date, it is considered filed on April 15.

“Amended returns are great for claiming a missed deduction or correcting an error discovered later,” Stranger told Business Insider. “But they should be used with caution, because changing a return increases the IRS ‘limitation period for verifying that year a tax return.”

How to file an amended tax return

Filing an amended tax return is easier than you might think. Here is what you will need to deposit:

  • One Form 1040-X for each year you change your return
  • A copy of the original declaration that you must correct or update
  • Any notice you received from the IRS about problems with your return
  • Any supporting documents you need regarding the changes you make (for example, additional 1099s or W-2s if you change your income)

Here’s how the process works:

  1. Complete form 1040-X. If you are amending tax returns for more than one year, you must complete a form for each year. You can complete the form online if you changed your 2019 or 2020 tax return and initially filed your taxes online. Otherwise, you will need to complete a hard copy and mail it to the IRS.
  2. To follow the instructions on the IRS website. The form has three columns: In column A, you will add the numbers from your original tax return. In column C, you will add the new precise numbers. Column B is the difference between the numbers in the other two columns. On the back of the form, you describe why you are making each of the individual changes.
  3. Mail your amended return on paper or file it online with your tax preparation software.

After you file an amended return and the IRS receives it, it may take 20 weeks or more to process it and issue a refund if you have one. The long lead time is the result of Covid-19 pandemic. This period applies whether you filed your amended return digitally or by post. (Although generally in the future, adding an online filing option for amended returns will speed up the process and get your money back faster.)

You can check the status of your amended return – for this year or up to three previous years – using an IRS online tool: Where is my amended return? Your feedback will generally not appear in the tool until three weeks after the date it was posted. In order to verify status, you must have your social security number, date of birth, and zip code handy.

If the status shows as “receipt,” the IRS has your return amended and is working on it. “Adjusted” means they’ve made some change to your account – you may now owe tax or get a refund. If the status is “completed”, it means the processing is complete and you should soon receive a letter with the details.

When to file an amended return?

Common reasons people have to file amended tax returns include wanting to claim a tax credit or deduction that you did not include on your original return, the need to update your income, and change your tax payable. the IRS Interactive tax assistant has a questionnaire that will help you determine if you need to file an amended return.

But it’s important to note that not all tax errors necessarily require an amended return.

The IRS classifies some errors as “math or writing errors“, and it reserves the right to rectify such errors without any action on your part. This right is known as IRS mathematical error authority, according to the National Taxpayer Advocate of the IRS. If you’ve fumbled with addition or subtraction, or forgot to include information you need to prove that you qualify for certain tax credits, you do not need to file an amended return.

Additionally, Stranger says that some errors, like changing your filing status from a married filing in conjunction with a separately married filing or changing your accounting policy (in certain circumstances) cannot be rectified by filing. an amended declaration.

“A little-known rule allows for a ‘replacement return’ that can be filed up to the due date of the tax return, including extensions, and replaces the tax return without any of these restrictions,” said Stranger. Because of this, she says it’s always a good idea to file an extension when doing your taxes, even if you file before the April deadline – it gives you more time to make changes by filing a new one. replacement statement if you make a mistake.

If you need to file an amended return, keep in mind that the changes could also affect your state income tax return. Contact your state tax authority to find out what steps you need to take to change your state income tax return.

Is there a penalty for filing an amended tax return?

There is no penalty for simply filing an amended return. But if your mistake made you pay less tax, you will owe that extra tax. If you modify your tax return before the April deadline and pay the tax balance you owe, you won’t have to pay a penalty. If you do not file by the deadline, the IRS may impose penalties and interest for the additional tax.

You may also be wondering if filing an amended (or multiple!) Tax return increases your chances of undergoing the dreaded IRS audit.

“Asking for a high refund on an amended return carries a high risk of being audited,” Stranger said. “But otherwise, I haven’t seen it increase the overall risk more than any other filing.”

The financial report

Filing an amended return can be a bit of a hassle, but it will set the record straight with the IRS and ensure that you only pay your fair share of tax. The above steps and related IRS resources will make filing an amended return relatively painless.

Stranger says she recommends filing your amended return as soon as possible after you realize there’s a problem. “It’s always better to voluntarily file an amended return rather than waiting for the IRS to find an error,” she said. “You are much more likely to get a penalty waiver for voluntary compliance than if you are subject to an IRS review. “