Sometimes, it can feel like filing taxes is more of an art than a science. Tax laws are constantly changing. You must also rely on employers, banks, and other organizations for accurate information about your income and deductions. Despite your best efforts, your tax return may have incorrect information. In this situation, you may have to file an amended tax return with the IRS.
What is an amended tax return?
An amended tax return is an updated tax return (Form 1040-X) you send to the IRS to correct mistakes on your original return. These changes can include your filing status, income, deductions or credits, and tax liability. Maybe you got an additional tax form after filing such as a corrected 1099 from your broker, or you missed a sizable deduction such as a charitable contribution. The IRS may have even published updated guidance on how to file between the date you submitted your return and when taxes are due.
You do not need to submit an amended tax return for mathematical errors or missing forms, as long as your information is reported accurately. The IRS takes care of those issues (or asking you for clarification) automatically.
Why file an amended tax return?
If your original tax return was incorrect, an amended tax return recalculates the amount of taxes you owe for the year. You want to pay the correct amount of taxes each year for two reasons:
- Overpaying the IRS means keeping less of the money you earned.
- Underpaying the IRS means you could owe penalties and interest in addition to your taxes.
Generally, you have no obligation to file an amended tax return if you made a mistake that resulted in an underpayment of your taxes. However, it may beneficial to do so. If the IRS finds the error and assesses additional tax, you can be subject to a 20% penalty.
How far back can you amend a tax return?
In general, you can amend a tax return up to three years from the date your original return is filed, or two years from when you paid the taxes—whichever is later. The IRS does offer some exceptions to this deadline for amended tax returns.
Can you file an amended tax return after 3 years?
The IRS allows taxpayers in specific situations to file amended returns after three years. You may qualify for additional time to submit changes to your original tax return if any of the following apply:
- You experienced economic hardship caused by a physical or mental disability.
- You were impacted by a federally declared disaster.
- You spent time in a combat zone or contingency operation.
- You have bad debt or worthless security. (File within seven years.)
- You have a foreign tax credit or deduction. (File within 10 years.)
Amending a Tax Return to Reduce an Assessment
Although the time for filing an amended tax return to claim a refund may have expired, you can still file a 1040-X to reduce an assessment that the IRS is attempting to collect from you. For example, assume Jack has a back tax debt of $6,000 for 2015 the IRS is attempting to collect. He realizes he forgot to claim some itemized deductions for which he has documentation. The additional deductions will reduce his back taxes to $4,000. Since Jack is not requesting a refund, he can still file an amended tax return for 2015 with the IRS to reduce his 2015 taxes.
Determining when and how to amend a tax return can be complicated. Consider contacting the tax professionals at East Coast Tax Consulting Group to determine if you can still amend your tax return and if it is beneficial to do so.