To Amend or Not to Amend: It’s a Good Question

Most Americans just filed their yearly income taxes. Some will have sent the government money they still owed despite payroll deductions or estimated tax payments, while others may have already received a refund. But what if you discovered that something was missing or incorrect on your return? Should you file an amended tax return? There are pros and cons to both choices. To help our clients, prospects, and others understand the reasons to amend your tax return (or not), JLK Rosenberger has provided a summary of what you need to know below.

The Case for Both Sides

First, there is no actual requirement to file an amended tax return and no penalty if you don’t, even if you discover an error or new information comes to light (such as receiving a revised 1099 or K-1) – although in the latter case, the IRS says you should amend.

This is why you need to weigh the costs of the time and effort it will take to amend a return versus the reward, especially if you only expect a meager increase in your refund. If the refund is potentially larger, for instance if you forgot to claim a key deduction like your state taxes, mortgage interest, or a sizeable charity contribution, the effort may be worth it. Worthless securities and bad debts also may merit an amendment – and taxpayers have up to seven years to go back and claim those losses.

If you decide to amend, though, you can’t just correct the items that will give you a refund and neglect those that increase your tax liability. An amended return is more likely to be audited than an original return in general, and every tax return is filed under penalty of perjury, so amending pieces and parts of a tax return could get you into serious trouble.

If your amended return results in asking for considerable money back, the IRS may review it even more carefully, although you can always choose to apply all or part of the expected refund to your current year’s tax instead of asking for cash back.

It’s worth noting that amended returns are only filed on paper via Form 1040X even if you filed your original return electronically and whether you previously filed Form 1040, 1040A, or 1040EZ. If you are amending more than one tax return (i.e. for different years), you will need to prepare a separate 1040X for each return.

Timing an Amended Tax Return

Timing counts when it comes to amending a tax return, and there is a select timeframe available. It’s commonly stated that you must amend within three years of your original return filing. However, the cutoff is actually three years from the date you filed your original return or two years from the date you paid the tax for the return you wish to amend, whichever is later.

The IRS typically has three years to audit a tax return. Even if you file an amended return, the three-year statute of limitations does not get extended. The amount of time left on the three-year window when you amend can be used to your advantage to assuage the worry of an audit. However, if it shows that you owe more, you will owe additional interest calculated from the due date of the original return (without regard to extensions) and probably penalties as well.

Possible Reasons NOT to Amend

It’s important to first ask yourself whether the tax return you filed was accurate to the best of your knowledge when you filed it. If so, it’s an okay bet to decide not to file an amended return.

If you simply discover a math error in your calculations, the IRS says there is no need to file an amended return. Their computers or paper-file reviewers will catch the error and correct any amount owed or due to you.

If you forgot to attach certain paperwork to your return, such as a W-2, 1099, or schedules to show your work for different areas of the return, the IRS will likely be able to process your return without it or will send you a letter requesting the missing information.

Contact Us

Timing, accuracy, and necessity are key factors when it comes to amending a tax return. If you need assistance deciding whether or not to file an amended return, or if you would like help filling out Form 1040X to ensure that it is complete and error free, JLK Rosenberger can help! For additional information please contact us at 949-860-9902, or click here to contact us. We look forward to speaking with you soon.

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